A crisis that draws the best from investors
Companies known for their ethical policies are faring better in a virus-stricken stock market. The crisis is rewarding good behavior.
To help end the coronavirus pandemic, many people are reinforcing certain codes of behavior. They are more neighborly and salubrious. They are social distancing and shopping without hoarding. They are learning the etiquette of video conferencing from home. These are signaling a new “we are all in this together” ethic.
In surprising news, many are also focused on ESG.
Those initials stand for a code of behavior in the business world known as “environmental, social, and governance.” In short, these are metrics used by more corporations in recent years to put stakeholders on par with shareholders. They focus on long-term sustainability over predatory short-term profits, on issues like climate change and inequality over the next quarterly report.
During the coronavirus crisis, for example, many workers are being furloughed instead of fired. Companies are donating equipment or finding other ways to help their community. They are suspending dividends to stockholders or putting off bonuses for executives.
But here’s the big news: According to research by Bloomberg Intelligence and RBC Capital Markets, investors who bought stocks in companies with strong ESG are faring better than other broad indexes so far this year. Money keeps flowing into ESG mutual funds, says Bank of America.
In other words, as the tide goes out on the global economy, doing good is paying off.
Despite the current panic among investors, many now see an upside to ethical values in companies over bottom-line profits. The virus crisis is lifting many codes of behavior. Why not in capitalism?