Corporate Virtue in the Time of Coronavirus

(Bloomberg) --

Being a capitalist with a conscience sometimes means putting people over profits, both for their benefit and that of the company in the long run. The Covid-19 pandemic has made this plain. As millions of people began  working from home, companies are being pushed to adapt faster than most are used to. And in doing so, they’ve played a positive role in the fight. 

Company responses to the virus and its impact have unleashed a new sort of business creativity, as executives scramble to find ways to adjust sick and paid leave policies, pay hourly workers, and test systems for distributed work.

It’s also been a boon to consumers. Tech companies including Verizon, Google and Comcast have pledged to keep customers internet-connected for the next 60 days even if they can’t afford it. The CEOs of Delta, United and Air France said they would forgo some or all of their salaries for the rest of the year. Medical and pharmaceutical companies are rallying their systems to get necessary supplies to the right spots. Even Facebook is cracking down on coronavirus misinformation (while paying employees a $1,000 bonus).

And banks and airlines (as they suddenly plead for government support) have paused plans to repurchase their own stock.

“When the chips are down, that’s when it’s time to walk the talk,” said Martin Whittaker, the chief executive of JUST Capital, which has been tracking corporate responses to the virus. In some sense, the growing emphasis on ESG over the past few years may have encouraged more concrete action in a crisis. “If you get into the second, third and fourth quarter of this year, you can’t start talking a good game about corporate purpose if you didn’t step up when it was needed,” says Whittaker.

While HSBC analysts said the coronavirus is pulling focus away from ESG issues in the short term, mainstream investors are going to be asking more tough questions of companies on their strategy and resilience, especially for when the next crisis comes. 

“It’s critical to have human-centric policies that are flexible and adaptable," said Natasha Lamb, managing partner at investor Arjuna Capital, which for years has been pushing companies to protect and preserve their workforces while closing the pay gap. It’s also just good business, she says. “During the Great Recession, employers laid off a lot of people, and it took them a really long time to hire people back,” Lamb says. “You hope that doesn't happen today.”

“It’s really important,” she adds, “that companies are able to weather the storm.”

Sustainable Finance In Brief

• The pandemic is hitting industrial production in Europe, causing a slowdown in power demand. As seen in the chart above, options traders are planning for a fall in carbon prices.

• Older ESG funds have been outperforming newer rivals in the market tumult. Over the first few days of the collapse, some ESG funds held onto their gains thanks to tech and healthcare stocks. About half of ESG funds with $1 billion in assets bested the S&P 500 through March 16, according to data compiled by Bloomberg.

• Annual shareholder meetings are moving almost exclusively virtual this year, though activist investors hope it’s temporary.

• Storebrand’s top ESG money manager is a philosophy graduate who is betting on tech and renewables, and getting outsized returns

• Sweden’s $37 billion AP1 pension fund is divesting fossil fuels.

• Shell halved its CEO’s pay over shareholder concerns and seven deaths. Performance linked to sustainability metrics was mixed. 
• Swiss private bank Lombard Odier is launching a $260 million climate transition fund. 

Emily Chasan writes the Good Business newsletter about climate-conscious investors and the frontiers of sustainability. 

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