The Covid-19 pandemic shows how drastically a nonfinancial issue can affect investors, said John Streur, president and CEO of Calvert Research and Management, an investment management firm focused on responsible and sustainable investing.
The fact that something that started as a health crisis can drag down the stock market will make more people realize that other nonfinancial issues—such as climate change—are risk factors for investments, Streur said during a webinar today.
“We will come back as a society and ask what other nonfinancial issues are out there that can impair the value of investments. The pandemic is a massive wake up call,” he said. “Seeing how companies respond to the Covid-19 emergency will help us move Calvert’s research forward to assess companies’ general preparedness for other situations.”
Calvert, which rates the companies it invests in based on environmental, social and governance issues, held the webinar to explore what the companies it invests in are doing during the pandemic and what it means for the future.
“Human psychology has a difficult time preparing for an emergency that is not right in front of them," Streur said. "Governments did a fairly poor job of preparing for the current emergency.
He believes that climate change is another example of those types of risks, and as time goes on investors will place greater weight on these risks.
At the same time, he added, companies in a strong financial position are better positioned to respond to this and other emergencies.
“Investors already are looking at companies on the basis of how well they are managed. High-quality companies will come through this crisis in better shape,” Streur said, noting that companies that perform well on ESG issues outperformed the market in the past and continue to do so during this crisis,
Another issue Covid-19 has brought to the fore is how companies treat their employees, he said that Covid-19 will prompt investors to look more closely at how well companies manage relationships with employees and with the community.
In highlighting both good and bad behavior during this time of crisis, Streur pointed out that Bank of America raised wages recently and banks in general have stepped up, while Carnival Cruise Line did a particularly poor job of managing the crisis.
The pandemic also focuses attention on supply chains and those companies that have built redundancy and resilience into their supply chain. “Investors will be paying more attention to this going forward,” Streur said.