John Kavanagh and Max Worthington
With the overall numbers of new cases and deaths continuing to decline and lockdown measures slowly being eased in most major economies, the worst of the COVID-19 pandemic appears to be abating. As countries start to rebuild in the months ahead, the crisis has clearly revealed a fundamental reshaping of investor priorities, accelerating trends that began long before the pandemic took hold.
During this time, health and care workers have rightly been championed as stalwarts of society while key workers have continued to provide essential goods and services to grateful communities across the world. Charities, community groups and private fundraisers have shown the good that can be done through voluntary affirmative action. Societies have continued to function as people have banded together to support each other in their times of need.
Private investors, too, have risen to the challenges posed by COVID-19, supporting employees, customers, communities and supply chains during the crisis. In response to the crisis, investors have demonstrated the highest principles of responsible asset stewardship and corporate social responsibility. Global Infrastructure Investor Association (GIIA) members have committed upwards of $200 million in financial donations to good causes, care for employees and flexible payment terms for customers during this time. As long-term stewards of capital, private investors are helping to mitigate the impacts of the pandemic on society as a whole.
A decade after the global financial crisis of 2008-9 began to precipitate a shift in corporate behavior, such views are starting to converge into something akin to a new worldview, shared by the world’s leading executives, but also by consumers, employees, campaigners, academic institutions and regulators. This shift is often referred to as a new form of ‘stakeholder capitalism’.
As Larry Fink, chairman of BlackRock, the world’s largest asset manager, warned in 2019 that companies without a social purpose fail to make the investments in employees, innovation and capital expenditures necessary for long-term growth. Investors have moved the dial forward, marking a clear link between social purpose and the success of private enterprise. One can’t now exist without the other.
Fiona Reynolds, CEO of the UN Principles for Responsible Investment (PRI), points to the emergence of a more ‘progressive mindset’ since the most recent prior crisis in 2008-9. This mindset encourages investors to design their strategies from the start with long-term value creation in mind, not just focusing on maximising private capital returns but on delivering value for the societies within which they operate.
Last year, the World Economic Forum and Business Roundtable updated their mission statements to reflect this new reality; Business Roundtable’s new Statement on the Purpose of a Corporation was signed by 181 CEOs who committed to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.
The COVID-19 crisis has provided the opportunity for these words to be put into action, and responsible investors haven’t hesitated from stepping up and leading the way to the post-pandemic recovery.
Responsible investor actions
Private investors of all sizes have learned from the global financial crisis and stepped forwards when they were needed most. US investment bank Goldman Sachs has pledged US $25 million as part of the Goldman Sachs COVID-19 Relief Fund to support communities in most urgent need globally, while the firm has matched employee donations up to an additional $5 million. These funds have directly impacted on some of the hardest-hit communities in the US while their $275 million Small Business Stimulus Package has supported some of the hardest-hit small businesses, ensuring that they are not left behind during the crisis. Similarly, KKR & Co. has created a $50 million fund dedicated to supporting frontline workers and mitigating the financial hardship created by the pandemic.
DWS, a pan-European asset manager has donated EUR 1 million to various charities and food banks across Europe and the US whilst maintaining day-to-day operations and preserving employee wellbeing. Hamish Mackenzie, Head of Infrastructure at DWS notes that: “a huge effort was made by the DWS team to support management as they worked to ensure the continuity of operations whilst protecting the safety of employees. Clear and regular communication, early engagement with employees and other stakeholders and the ability to draw on the experiences of the Global Financial Crisis were all essential tools to navigate the crisis.”
Others have pointed to the responsibility investors hold towards their portfolio companies and operating assets. Chris Manser, Head of Infrastructure Equity at Swiss Life Asset Managers, observes that: “we are fully aware of the obligation that we particularly have as an infrastructure investor to incorporate and promote sustainability and ESG practices, both within our platform and at the companies we hold in our portfolio. The pandemic has, once again, demonstrated the need for this push towards a responsible business environment and we will continue to support the effort now, and in the future.”
The crisis has also shone a light on those organisations not to be seen to be behaving responsibly through, for example, accepting government support schemes for lower paid staff while retaining the pay-packets of those at the top end of their payroll. “The crisis has definitely impacted how we evaluate company behaviour,” says Marte Borhaug, Aviva Investors’ Global Head of Sustainable Outcomes, who has been engaging with companies on what their social responsibilities might entail. “There’s been a turning point; investors and consumers have become much more vocal about companies that are perceived to be failing to take their social role seriously.”
As the crisis recedes, pre-existing structural challenges will move back into focus for governments and regulators. Speaking to some of the leading young investors at the Personal Investment Management & Financial Advice Association’s “Virtual Fest” on Wednesday 3 June, Mark Carney, former Governor of the Bank of England, encouraged young investors to channel their investments to sustainable opportunities. He said that the crisis will precipitate a “sweet spot” of opportunities for investment in areas such as infrastructure, which creates jobs and has “big multiplier effects on the economy”, which will bring benefits across the board to both investors and societies for the long-term.
Investors will once again be leading the way in delivering the transition to Net Zero economies and delivering on the asks of the ‘build-back-better’ movements, including through demanding that the companies that they own and the assets that they operate are resilient to climate risk. Groups like the United Nations Net Zero Asset Alliance and the Investor Agenda are already establishing a roadmap for how the world’s largest investors are seeking to accelerate and scale up the actions that are critical to tackling climate change and achieving the goals of the Paris Agreement.
Much remains to be done but the crisis has shown what can be achieved when private investors step up to the challenge and embed a long term responsible view in their investments to generate returns for society and not just portfolios.
 Mackenzie, H. (2020), Email from DWS
 Manser, C. (2020), Email from Swiss Life