Of course, links can be made to long-term trends such as a growing and aging population and the loss of biodiversity (through which people could get exposed to unknown viruses1). However, those long-term trends are still exactly the same as they were before this crisis. Nothing new under the sun. If anything, this crisis reinforces the fact that sustainable development is the only way forward. And it is our response to this crisis that is most important now.
The current situation, with less air travel and less production, shows us what the world can look like. Clear waters, blue skies. With respect to the S in ESG, we find that solidarity is important, and that companies can have a social face. We see companies that are changing production lines to make hand sanitizer or ventilators for hospitals, and some are even giving away input for these products for free, as it is small in light of their business, but can make a huge difference to the hospitals that receive it.
We also see that companies are quick to adapt to taking measures that they were reluctant to take in the past, such as the ability for their workers to work from home, have flexible hours, and have meetings via conference calls rather than taking trips. This is accidently all good for equality, diversity and the environment.
A blessing in disguise? No. First and foremost of course because of the tragic human consequences of the deadly viral outbreak, but also because this crisis and the lockdowns have led to a complete economic standstill and substantial market declines. The long-term effects of this standstill will only be known afterwards. However, the longer it takes, the more profound the effects will be.
It will, at a minimum, hit companies’ abilities to generate long-term value, not only for shareholders, but more importantly for all stakeholders, including their employees and the communities in which they operate. In the Investor Statement on Coronavirus Response2 signed by 195 investors around the globe, including Robeco, we ask companies to provide paid leave if necessary, prioritize health and safety, maintain employment, suppliers and customer relationships, and exhibit financial prudence.
The two most important issues from an ESG perspective when it comes to financial prudence are capital management and remuneration. Again, these are not new topics for sustainable investors. However, in this situation we will be assessing on a case by case basis the prudence of companies when it comes to dividend payouts and share buybacks.
We will also be critical of remuneration proposals for board members. As our proxy advisor Glass Lewis puts it3: “Companies with strong pay structures will be challenged to abide by them, and firms with less robust programs will be forced to choose between lying in the bed they’ve made, or changing arrangements and all but guaranteeing shareholder ire.” We have already come across the first companies that are floating the idea of topping up pay packages to keep executives incentivized this year. We will be very critical of this kind of behavior, especially where employees face hardship, or where shareholders expect far lower returns.
When it comes to employees, we expect company responses to the coronavirus to be a proxy for their broader approach to human capital management. In the Investor Statement on Coronavirus Response, we noted that the board of directors is accountable for the long-term human capital management strategy of their companies. Companies with good human capital management have invested in their employees and will be well served by having retained a well-trained and committed workforce when business operations are able to resume, we believe.
The statement on the Purpose of a Corporation signed in August 2019 by 181 CEOs in the US will be put to the test. In this statement, the CEOs commit to leading their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders. Now is the time to show that they mean what they say.
Looking at the financial markets and the broader economy, we see that governments and central banks are doing everything they can to keep their economies afloat as much as possible. Their monetary and fiscal responses are both unprecedented in size. They are aimed at mitigating the standstill. The USD 2 trillion coronavirus relief bill in the US, for example, includes one-time payments to individuals, strengthened unemployment insurance, additional health care funding and loans and grants to businesses to deter layoffs.
Longer term, however, more stimulus is probably needed to aid economic recovery. This represents an opportunity for governments to combine economic stimulus with social and environmental development. This is especially needed now, as the low oil price will potentially hurt investments in renewable energy. Although it’s already cheaper in some parts of the world to generate energy from the wind and sun, falling oil prices might make people more inclined to use coal, oil and gas. This would have a negative impact on the further development and consumption of green energy.
In the US, experts on climate and social policy in academia and civil society drafted a menu for green stimulus to rebuild the economy4. It combines social and environmental development. Some of the ideas presented are helping to create green jobs in clean energy expansion, building retrofits and sustainable homebuilding. Others are aimed at creating local food economies, or assisting with public transit maintenance and operations, electric appliance and vehicle manufacturing. Their ideas also promote green infrastructure construction and management, local and sustainable textiles and apparel, and partnering with existing pre-approved apprenticeship programs to bring more low-income workers into good unionized jobs.
In Europe, stimulus to make green investments might help to adhere to the carbon targets that European countries have committed to. Going a step further, public and private sectors could work together to contribute to achieving the Sustainable Development Goals. Issuing green and social bonds might provide an opportunity to finance these investments. Green bonds currently comprise less than 0.1% of total sovereign debt, according to S&P Global. So there is plenty of room to finance social and environmental stimuli!
We live in extraordinary times. I hope everyone stays safe, and when we get out of the crisis, I hope our response to this crisis will help create true sustainable societies and economies.
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.
Please read this information carefully.
This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:
3. Local legal and sales restrictions
The information contained in the Website is being provided for information purposes.
Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.
4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.
5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.
6. Third party websites
Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage.
7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.
8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.
10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.