Responding to climate change has certainly been high on the agenda for many asset managers and institutional investors in recent years, do you think COVID-19 will distract from this?
CL: I think it will change the conversation and, despite the obvious tragedy of this situation, there could be valuable lessons we learn from this experience. With global travel restrictions and social distancing measures currently in place, fewer people are flying, carbon emissions are down, and the planet is, in effect, catching its breath, and we should play close attention to what happens as this will offer interesting clues as to what may be possible. There are important lessons for us to learn here. In some ways COVID-19 has given us preview of climate’s worst impacts. Pandemics and climate change are both physical risks and they share many of the same attributes and catastrophic consequences. If we don’t act on climate change, we may continue to find ourselves experiencing this type of jarring disruption on a global scale again in the future.
BP: Many governments are starting to integrate sustainability principles into their COVID-19 responses. South Korea for example, has announced plans to aim for net-zero emissions alongside its economic response to the pandemic2 and there are growing calls for the European Green Deal to be used as a framework across the European Union to address both the short and long term economic impacts of the pandemic3. It is not a case of these countries seizing on one crisis to solve another, it is about learning from this experience and managing physical risks to avoid the type of disruption we are seeing with COVID-19.
Do you think we will see a greater focus on the ‘S’ in ESG in the future?
MN: The global pandemic has sparked a renewed focus on the social dimensions of ESG and companies’ social responsibility. The S in ESG covers a broad range of factors including health and safety, employee relations and conditions, modern slavery, human rights and much more. These are all incredibly important factors and ones we need to continue to focus on in the future, especially as COVID-19 is disproportionally impacting those who are already most vulnerable.
CE: The social aspect needs to be carefully considered by governments and businesses now that they are looking to restart the economy. A successful restart will depend on prioritising people’s health, safety and wellbeing. For us in MIRA, as a manager of critical infrastructure and real assets around the world, our priority will continue to be the health and wellbeing of our people. We believe that continuing to focus on all aspects of ESG will place us in a better position to create real and lasting value for our clients and ultimately the long-term savings of the investors they represent.
Is there a risk that ESG principles will be de-prioritized as countries and companies focus on restarting their economies?
CE: Yes, I think in the immediate term, some companies may deprioritize various aspects of ESG as they focus on survival. The UN is urging companies and nations to ‘build back better’ yet some governments have chosen to relax protection measures in response to the pandemic. In the US for example, the Environmental Protection Agency has temporarily relaxed pollution enforcement.
CL: COVID-19 has shown us the risks of not having clear ESG frameworks and the importance of collaboration and resilience. The pandemic has highlighted how interconnected our world has become whether that be through supply chains, technology or travel. I do believe that maintaining a level of connectivity and an open dialogue when it comes to ESG will be key to navigating a path forward. We have seen first-hand for example, the benefits of sharing information and best practices across our portfolio of assets in recent weeks. The companies that come back stronger will be the ones that focus on long-term sustainability and the resilience of the business. The financial sector has an important role to play in enabling post-COVID economic recovery, particularly long-term investors who can align recovery with sustainable outcomes.