Some fund managers are increasingly basing investment decisions in part on how considerate companies are to their employees and clients during the coronavirus pandemic.
Did firms move right away to let their staff work from home? Did they continue paying contract employees who had to stop working? Are they offering flexibility for clients who can’t pay bills on time? More and more, investors such as Dai-ichi Life Insurance Co. and AllianceBernstein Holding LP are asking questions like those when considering where to park their money.
It’s part of the growing global trend of environmental, social and governance investing to put money in ventures that benefit society, but these fund managers think it also just makes business sense. Being good employers and business partners may ultimately pay off with sustainable returns in the long term if, for example, it results in higher staff retention rates or helps avoid disruptions in supply chains, the investors reckon.
“This pandemic is a litmus test that shows which companies have been responding to the crisis quickly and appropriately,” said Haruna Usui, a senior investment strategist at AllianceBernstein Japan. “There were some companies that took a longer time before they let their employees work from home, for example. We would like to analyze individual cases.”
Investment in projects that benefit society is booming worldwide, with issuance of social bonds to pay for such deals hitting a record globally. In Japan alone, 328 billion yen ($3 billion) of such securities have been sold so far this year, already reaching more than 70% of the figure for all of 2019.
The coronavirus pandemic is intensifying investor focus on ESG factors, as it showed how a public health shock can have severe macroeconomic and credit implications, Moody’s Investors Service said in a report this week.
Investors are watching whether companies are offering a helping hand as the coronavirus outbreak batters economies across the world. Japan is in a recession and its economy is expected to shrink more than 20% this quarter. Corporate bankruptcies in the country related to the pandemic rose more than 30% in the three weeks through Wednesday, according to company research firm Teikoku Databank, as visitors to restaurants, hotels and inns all but disappeared for months.
In addition to asking about working-from-home arrangements, equity and credit investors at AllianceBernstein in Japan and elsewhere query companies about things like whether they helped install technology equipment for staff at home, and allowed clients to delay bill payments, according to Usui.
At Dai-ichi Life in Tokyo, the insurer will start from July to ask 250 companies it has equity investments in whether they are taking steps such as giving staff the option of working from home and whether they have contingency plans to keep running their businesses even if their employees become infected with the coronavirus, according to spokesman Tsubasa Miyata.
“We are a long-term investor, so we won’t be selling shares of companies immediately even if they don’t meet our ESG expectations,” said Miyata. “We will continue having dialogue with them and monitor how they will change over the next five to six years.” — Bloomberg