Michele Leung, Green Finance Advisor of Friends of the Earth (HK) / 香港地球之友綠色金融顧問 Michele Leung
The COVID-19 outbreak presents significant risks across sectors in global economy. One topic that has been widely discussed is the labour management and human capital, and how companies are managing through these times. For example, in aviation industry, lack of strong labour management program and low cash ratio could elevate business risk. The lapses in supply chain labour management may deepen concerns on business continuity for sectors like technology hardware. For retail food & staples, they are also facing public scrutiny as protecting their employees while ensuring continued access to essential good. Companies without regular employee channels and a poor track record regarding health & safety would likely to be impacted. On the other hand, companies that have been positioned to face the human capital challenge by offering systemic training programs, competitive benefits and widespread communication channels are likely to prove its resiliency.
ESG has never been more important than now in the midst of pandemic. It has been proven that ESG should be considered as one of the risk factors, and investors need to understand the ESG characteristics and the impact on their portfolios. Recent studies have also shown analytically that ESG as a positive distinctive driver of performance in this particular period.
While the duration of the crisis is uncertain, the economic consequences of pandemic will certainly last for few quarters. Investors may want to take the current opportunity to reset the portfolio, integrate ESG into their strategy, or at least, adding the ESG transparency to their portfolios.