Evidence is emerging that companies with strong environmental and social credentials are more likely to be resilient to the challenges of the Coronavirus pandemic.
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According to research from HSBC, shares of companies focused on climate change or environmental, social and governance (ESG) issues have largely outperformed the market during the early weeks of the pandemic.
Ashim Paun, co-head of ESG research at HSBC, said ESG factors were important in understanding how companies and sectors are exposed to the Coronavirus crisis.
“Our core ESG conviction is that issuers succeed long-term, and hence deliver shareholder returns when they create value for all stakeholders – employees, customers, suppliers, the environment, and wider society,” he explained.
“When crises like COVID-19 manifest, particularly with social and environmental causes and implications, investors can see ESG as a defensive characteristic.”
‘Correlation between sustainability and risk management’
As well as positive investor sentiment, companies that are making progress to improve sustainability within their supply chains are also likely to be more resilient to the supply disruptions associated with COVID-19.
Speaking at a procurement event in London in March, Jim Carter, commercial director at the Ministry of Defence said: “If you think about coronavirus and the impact on your supply chain, suppliers who have better engagement on sustainability issues can manage the risk on coronavirus as well. There is a correlation between suppliers who lean into the sustainability agenda and an ability to manage macro risks.”