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At our first Kekst CNC focus group, broadcast on Times Radio last week, we asked a group of uncommitted voters across England what they thought about “ESG”. Not surprisingly, few understood what the term meant. An acronym that businesses and investors use on a near-daily basis, focused around environmental, social and corporate governance practices, has no cut-through with the greater British public.
Today, most offices and many industrial facilities remain shuttered. Employees are scattered in a state of enforced refuge and we are all leaning heavily on technology for continuity-of-business. The onslaught of Coronavirus has upended the way we operate. It has asked tough questions of organisations large and small across the world and hard decisions are made on a daily basis often in response to quickly changing Government guidance.
Being in the midst of the COVID-19 pandemic does not make corporate financial reporting any easier. However, while challenging, the situation has not yet led to any radical changes in how companies present quarterly reports, apart from one major aspect –financial guidance. JKL Kekst CNC has analysed quarterly financial reports from January-March 2020 that were published by the 50 largest listed companies in Sweden. We compiled the financial guidance and outlooks provided and evaluated how each company communicated the effects of COVID-19 on their results. From this analysis, there are lessons to learn for the upcoming reporting season.
Three months into the novel coronavirus crisis, it has become clear that ESG (Environmental, Social, Governance) investing is not about to be placed on the backburner during the pandemic. In the first quarter of 2020, a net US$40.5 billion went into funds scoring high on ESG criteria while traditional mutual and exchange-traded funds saw net outflows. Indeed, 94% of sustainable indices outperformed their parent benchmarks in the first quarter 2020, according to a BlackRock study.
Public activity as measured in hard numbers by ActivistInsight, is down significantly in Q1 2020. However, it is a tenuous metric, especially during times of severe dislocation. The market turmoil caused by COVID-19 creates an abundance of opportunities for activists: valuations have plummeted almost across the board and stark differences between companies´ ability to cope with the crisis are becoming increasingly apparent.
When we do finally emerge from the COVID-19 crisis, the world will employ a magnifying glass to assess how businesses responded to the crisis – and the steps taken to recover and rebuild. Leaders are already recognizing that rebuilding a “new normal” affords businesses an opportunity to recover in a more responsible, sustainable and, ultimately, better way.