Pandemic Means S&P’s Sustainability Gauges Won’t Look the Same
Pandemic Means S&P’s Sustainability Gauges Won’t Look the Same
(Bloomberg) -- The coronavirus pandemic is spurring a review of sustainability benchmarks at S&P Dow Jones Indices LLC, according to the firm’s head of environmental, social and governance gauges.
Factors such as flexible work arrangements and a company’s governance and management structures for handling sudden and unexpected risks arising from medical issues have become important to corporate sustainability assessment, Reid Steadman said in a phone interview. This comes as money managers ranging from BlackRock Inc. and Allianz Global Investors GmbH to Invesco Ltd. tout the outperformance of sustainability indexes over non-sustainability peers this year.
The global health crisis has sent several countries into months-long lockdown and triggered the world’s biggest work-from-home experiment, revealing the importance of employee management for companies. Remote working arrangements may well become part of the so-called new normal, while medical issues have become front and center with more than 8 million people infected by the virus globally within a few months.
“We are now thinking carefully whether we can capture even more elements of things like human capital management,” Steadman said, adding that they are reviewing “just how does something that is a medical pandemic play out in ESG scores.”
The New York-based executive said the index provider may also consider the impact of epidemics and diseases on the communities in which the companies operate as part of its new assessment criteria. Not only could current gauges and scoring be reviewed but the index provider may launch new measures that capture human capital management to a greater extent, he said.
S&P owns more than 100 sustainability benchmarks that are tracked by about $25 billion in assets, including investments by Japan’s Government Pension Investment Fund. S&P surveys and scores more than 7,000 companies globally for index inclusion, and the assessment includes social factors such as employee training and skill development.
Asia Expansion
The U.S.-headquartered index provider is in early discussions with asset managers in Japan, Taiwan and Australia who sponsor exchange-traded funds, Steadman said, noting that several products based on S&P’s benchmark ESG indexes will probably be introduced in Asia over the next 12 months.
There is “high interest” for the S&P 500 ESG Index in particular as it provides exposure to the U.S. The measure is down 2.3% year-to-date, outperforming the broader S&P 500 Index by more than one percentage point. “The S&P 500 ESG Index will become the underlying for investable products in Asia Pacific,” Steadman said.
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