- ESG has amplified risk management as the result of the pandemic
- Development of product innovation and financial solutions has accelerated over the past year
Dubai, United Arab Emirates: The COVID-19 pandemic has given new meaning to environmental, social, and corporate governance (ESG) factors prompted by the societal pressure on climate change and social equality. Consumers are more aware of ESG factors than ever before and are now actively researching products before purchasing or investing.
Maria Lombardo, Head of ESG Client Strategies for EMEA, Invesco, said: “The pandemic has been a catalyst for the wider consideration of sustainability strategies, frameworks and systems that can help withstand inevitable future shocks. Specifically in investment, COVID-19 has been a wake-up call for a lot of people who were maybe on the fence. Across industries we have since seen an uptick in announcements of sustainable and resilient business models, while the decent performance for ESG-focused funds during this period of market volatility increased interest of investors, even those previously shy from looking for ESG investment opportunities.”
The acceleration of the investment in sustainable finance has provided a clearer understanding of a new phase of ESG investing in the post-COVID-19 world. As investors analyze the resiliency of their investments in the face of the economic shocks stemming from the COVID-19 crisis, they have become more aware of the importance of incorporating better risk management in ESG investments. Invesco notes that sustainable companies have built financial strength, efficient and responsible supply chain and strong relationships with external stakeholders that contribute to reduced risks from extreme events and economic shocks, ultimately providing a more holistic approach to risk management and lower cost of capital.
“The pandemic has highlighted how the focus on financial survival cannot be taken in isolation,” said Ms. Lombardo. “Both finance and the real economy have to act hand in hand to reshape businesses towards sustainability and engage all stakeholders to yield a more sustainable future.”
How a company manages its relationships with employees, suppliers, and the communities in which it operates has become more prominent because of the pandemic. In this context the “S” in ESG has taken a new meaning as the focus turns to prioritizing the health of employees, worker retention and maintaining supplier relationships.
“The real value-add we offer as long-term, active investors is our level of engagement with corporate management, and the ability to use our votes and engagement to influence companies to improve their sustainable DNA,” added Ms. Zainab Kufaishi, Head of Middle East and Africa at Invesco. “The optimum goal is to work with management teams in order to improve the outcome for all stakeholders, using not only financial metrics but also looking at how a company achieves these metrics as it aligns shareholder and stakeholder values to make the business truly sustainable.”
The COVID-19 crisis has been a catalyst for public, private and other organizations to tap liquidity from all available sources, and many have turned to bonds to finance social projects. The focus on transition and sustainability has brought attention to adopting both long-term horizon and inclusion strategies, in the form of innovative product development such as social bonds. Social-finance instruments such as social bonds, which are debt instruments that raise capital for social projects, came out of the shadows over the past year. There has also been a shift from exclusion to inclusion, where investment funds are not only looking at true ESG champions but are including companies that are transitioning towards a sustainable model, thus recognizing value in the future. The market has also seen a number of regulatory and reporting initiatives underway providing frameworks and guidance for business and finance sustainability.
Invesco participated in a panel discussion at the Abu Dhabi Sustainability Finance Forum on 20 January to discuss the impact the COVID-19 pandemic has had on sustainable finance and ESG investing.
Invesco is a signatory of the Abu Dhabi Sustainable Finance Declaration, underscoring its commitment to championing sustainable practices in financial services in the UAE economy, and also a signatory of the One Planet Asset Manager Initiative.
© Press Release 2021
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
