Friday Highlight  

'Doing good’ during Covid-19 is fine, but is it strictly ESG?

'Doing good’ during Covid-19 is fine, but is it strictly ESG?

From beer to hand sanitiser, from designer dresses to face masks; unable to sell their usual products, companies rushed to help fight coronavirus.

Socially-conscious investors may want to reward them but it’s worth digging deeper. 

A simple way to think of it is that ESG and sustainability is in how a company makes its profits, not how it spends them.

A sudden redeployment of time, energy, and resources may be very worthy, but is it a free pass into the good environmental, social and governance club? 

The headlines can hide corporate histories which wouldn’t necessarily stand up to the scrutiny of ESG and sustainable screens or processes. 

Coronavirus has certainly made us all more aware of the ‘S’ in ESG and the social impact of where we, and our choices, fit into our communities, as well as the companies where we decide to put our money.

That’s a good thing and it’s a start. 

But it's far less about a quick pivot to have a ‘good’ crisis from a marketing perspective, and more a longer journey towards improving society and the planet, slogged out under the radar for years.

Walk the walk

Take one of our holdings, Microsoft.

Broadly speaking, the tech sector has a big problem around the ethics of cobalt, a mineral used to build rechargeable lithium-ion batteries integral to the mobile technology in your phone and laptop.

We've been working with our investors and Microsoft to clean up the industry. 

Microsoft’s chief executive recognised that while they try to source cobalt from reputable sources, you need to go all the way back to the start of the supply chain where it's mined, mainly in the Democratic Republic of Congo, to work out how to make it sustainable. 

When you engage on a big industry issue, it will take a while.

Even a willing company as large as Microsoft can have limited influence.

It may take a generation to really clean up cobalt, but it could have a huge positive impact because tech isn’t going away. 

Arguably, companies peddling positive impact only since the coronavirus outbreak, can muddy the ESG waters in a way that lowers the bar for positive progress and dialogue on sustainability.

That clothing retailer making masks and gowns, did it pay its suppliers during lockdown?

The industrial company now producing antibac, does it usually make its money supplying the arms industry?

Pin them down

A company that profits from something bad but then spends on charitable donations, I would argue, is not a sustainable company.

It's not running through its DNA. There are, however, some tell-tale signs of genuinely ESG-focused companies.