PRI makes recommendations on responsible investing during the coronavirus pandemic

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Social issues © olegdudko /123RF Stock PhotosWhen the dust settles from the coronavirus pandemic, what environmental, social and governance lessons will shine through?

A recent blog post by Fiona Reynolds, chief executive officer of the Principles for Responsible Investment, pointed to differences between this crisis and the crisis of 2008. “While there are certainly parallels with the global financial crisis just over a decade ago, there are also signs of change and evidence that some valuable lessons have been learned. This time around, in response to the virus, we’re seeing values of community and mutual support shine through and a far more human-centric economic response from governments, business and the investment community alike.”

And how companies respond to the crisis will be judged against ESG criteria, it said. “The landscape has changed around us. Accountabilities will be redefined and some corporations and investors will be unmasked as the lack of substance behind their ESG rhetoric becomes clear.”

In response to the crisis, the PRI has published several recommendations for responsible investors.

Firstly, investors should engage with companies that are failing in their crisis management. Companies that restrict paid sick leave in an unfair fashion or lay off workers sooner than necessary are harming both the speed of the economic recovery from the virus and their investors, the PRI noted. “Companies that prioritize human capital management can help avoid further harm and contribute to a quicker economic recovery.”

As well, there will be instances where ESG problems are being exacerbated or hidden by the crisis and investors should seek to engage on these issues. “Investors should watch for examples of companies and governments taking the opportunity to make decisions on, or announce, issues that would normally be subject to far more scrutiny than they will receive while public and media attention is focused on responses to the coronavirus.”

Given the urgency of the response to the pandemic, investors should also consider reprioritizing their engagement efforts on other topics, according to the PRI. “Most discussions with affected companies and sectors should be re-focused on issues relating to COVID-19 and the response to it. ”

Further, investors should use their voices to encourage a collaborative, economy-wide response to the pandemic. “Public signalling can also be an effective and efficient means of communicating expectations to investees without diverting company resources from crisis management.”

In addition to this, investors should participate in virtual annual general meetings, the PRI added.

Investors should also demonstrate their willingness to be flexible and provide financial support during the crisis. “Such requests naturally require case-by-case assessment, but where feasible investors should consider granting as much grace as possible in order to assist in a coordinated economy-wide response and recovery.”

Finally, investors should focus on maintaining their ability to make sensible, long-term decisions, the PRI noted. “Investors should review positions and trading activity, including those of any external managers, to ensure their investment activities are aligned with the long term and economy-wide response needed – including in light of concerns around the potential exacerbating effects of short selling.

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