Covid-19 continues to throw curve-balls in 2020, but for those investors with sustainability in mind, the long game remains in view. We’ve summed up our recent insights on environmental, social and governance (ESG) investing to bring you the latest edition of The Circular.
Going up in smoke: why carbon is dated
What’s it all about?
As told by Eoin Murray, Head of Investment at the international business of Federated Hermes, in this scary fairy-tale version of events, the brief Covid-19 CO2 hiatus offered a glimpse of hope through the smog of climate change. But only a system-wide decarbonisation effort by corporates, governments, individuals and investors can bring about a happy ending for the planet.
Consensus is finally forming around how the financial sector can measure the carbon content of businesses and portfolios. In September, Federated Hermes chaired the first meeting of the UK chapter of the ‘Partnership for Carbon Accounting Financials’– a coalition initiated by the business to create a standardised pan-industry approach to measuring CO2 that will help all parties “not only better understand the impact of their emissions, but also to work collaboratively in enacting genuine change”.
What’s the impact on investors?
While corporates might have the primary responsibility to decarbonise their business operations, investors can push for change through all assets classes, including novel products such as ‘sustainability-linked bonds’ – now championed by the European Central Bank – or identifying climate-change leaders. Inthis two-part podcast, Senior Credit Portfolio Manager, Nachu Chockalingam, and Aaron Hay, Lead Engager on the Fixed Income team, discuss why companies ahead of the curve on CO2 controls also tend to offer better investment returns.
“We do find that there is a very positive correlation between action that companies are taking on climate change, and in terms of returns.”
Nachu Chockalingam, Senior Credit Portfolio Manager.
Stay safe: the growth in health and well-being
What’s it all about?
With the coronavirus global death-toll now surpassing 1m, the need to address human health issues has never been more evident. But as this Federated Hermes Impact Opportunities report reveals, ‘health and well-being’ is one of the global mega-trends driving opportunities for investors and societies alike.
In August 2020, our half-yearly Global Equity ESG Fund report highlighted how Covid-19 has accelerated all sustainability trends. But specifically, the report notes “how companies responded to the health concerns of their workforce and customers was seen as poignant evidence of stakeholders’ rights gaining importance”.
What’s the impact for investors?
The focus on health is a global phenomenon, opening up options for investors beyond developed markets. For example, inthis quarterly report, Elena Tedesco, Co-Portfolio Manager of ESG strategies in the Global Emerging Markets team, showcases how one China-based company – Tigermed – has taken a great leap forward in medical drug research, setting a sound base for long-term sustainable returns.
“Embracing sustainability is not just about avoiding risks, it is also about finding business opportunities. In this environment, it is that type of thinking which enables businesses to thrive (or survive).”
Federated Hermes Global Equity ESG Fund H1 2020 Report