Page 142 - COVID-19: The Great Reset

and mobility, and supply-chain responsibility, will move to
the forefront of the investment process and will become an

integral component of due diligence.

2. The pandemic leaves no doubt in boardrooms that the
absence of ESG considerations has the potential to
destroy substantial value and even threaten the viability of
a business. ESG will therefore become more fully

integrated and internalized into the core strategy and
governance of a company. It will also alter the way in which
investors assess corporate governance. Tax records,

dividend payments and remunerations will become
increasingly scrutinized for fear of incurring a reputational
cost when a problem arises or is made public.

3. Fostering employee and community goodwill will be key to
enhancing a brand’s reputation. More and more,

companies will have to prove that they treat their workers
well, by welcoming improved labour practices and paying
attention to health and safety as well as well-being in the
workplace. Companies will not necessarily adhere to these

measures because they are genuinely “good”, but rather
because the “price” of not doing so will be too high in terms
of the wrath of activists, both activist investors and social
activists.

The conviction that ESG strategies benefited from the

pandemic and are most likely to benefit further is corroborated by
various surveys and reports. Early data shows that the
sustainability sector outperformed conventional funds during the

first quarter of 2020. According to Morningstar, which compared
first-quarter returns for more than 200 sustainability equity funds
and exchange traded funds, the sustainable funds performed
better by one percentage point or two, on a relative basis. A report
from BlackRock offers further evidence that companies with strong

ESG ratings outperformed their peers during the pandemic. [133]
Several analysts suggested that this outperformance might simply
have reflected the reduced exposure to fossil fuels of ESG funds

and strategies, but BlackRock asserts that ESG compliant

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