Welcome to Moral Money. Today we have:
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More coronavirus Saints and Sinners — featuring Amazon, Mastercard and Enel
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Environmental policy under attack
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Chief executive’s principles “building back better” after the Covid-19 crisis
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BlackRock sticks to its ESG guns
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Coronavirus response bonds launch in Europe
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A win for sustainability
When we launched Moral Money nine months ago, we were unsure if a newsletter covering sustainability and environmental, social and governance issues would fly. After all, the mainstream media has often been so dismissive of these topics that ESG might as well stand for “Eye roll, Sneer and Groan” for some journalists.
But this week delivered a sign of the changing zeitgeist: the Society for American Business and Economics Writers — the Golden Globes of business journalism — named Moral Money the 2019 winner in its general newsletter category.
This is great news for our young(ish) Moral Money team. But it is encouraging for anyone tracking sustainability, since it shows that ESG is no longer a specialist backwater, but moving into the media mainstream.
We know we could not have got this far without the support and ideas of our readers. Thank you! And we plan to build on this trajectory: working with our colleagues on Alphaville, we are shining a spotlight on how business and finance is embracing stakeholder ideas (or not) to rise to the coronavirus challenge; check out our “Saints and Sinners” series. We will also focus on an idea raised by Richard Curtis, the film-maker, in a webinar last week: how can companies and financiers “Build Back Better”? So please keep sending ideas, tips or challenges on how to turn this BBB idea into reality. (Gillian Tett)
Saints and Sinners
In 2008, when the global financial crisis hit, most big companies did not face much scrutiny about their treatment of employees or stakeholders. How times change. Last week the Finsbury-owned Glover Park Group in Washington surveyed American voters about their attitudes towards companies during the coronavirus crisis, and the results are striking.
The good news for the C-suite is that 42 per cent of respondents give big companies an “A” or “B” grade for their handling of the crisis so far. That beats Congress, which got an “F” from 48 per cent of participants. But voters expect big companies to step up: 82 per cent want them to offer sick pay to their staff and 81 per cent want them to keep paying staff, even if operations stop.
Some companies are taking note. Bank of America, Morgan Stanley, PayPal and Starbucks are among the American giants that have pledged to protect their staff. However, others such as GE are laying people off and many are dragging their feet on healthcare.
Take Amazon. These days the company seems to almost be “auditioning to be the new Red Cross” since it is providing critical infrastructure to deliver essential goods to people self-isolating. And it has just announced plans to hire 100,000 workers — welcome news at a time when millions are out of work.
Yet its treatment of its existing employees is anything but saintly. Staff in the sorting centres and other logistics centres — where Amazon needs 270,000 people to be on-site — say their working conditions leave them at risk of catching and spreading coronavirus. However, Amazon is not offering additional sick leave to people unless they have been officially diagnosed with coronavirus (which is not easy, given the lack of available testing); instead it is just appealing for donations to help them.
Its staff also complain about a lack of concern for social distancing, unsatisfactory hazard pay and a dearth of personal protective equipment. Worse, when some employees in New York City tried to protest against these conditions, Amazon fired the leader of the group — sparking a labour investigation from the state attorney general.
Enel, the Italian energy group, is taking a different tack. It recently announced a new insurance policy for its entire worldwide staff (which number more than 68,000), in the event that they are hospitalised after contracting Covid-19. Enel claims this is the first insurance tool of its kind to be offered to a worldwide workforce. It will be interesting to see if it takes off.
Other companies are responding to the social scrutiny by stressing their wider philanthropic endeavours. Consider Mastercard. Its vice-chairman and president of strategic growth, Michael Froman, told Moral Money that its response to the global pandemic included a $25m gift alongside the Gates Foundation and Wellcome Trust to finance clinical trials for therapeutic treatments. These aim to help alleviate symptoms for people who catch the disease, and whatever treatments come out of the initiative are spread among poor and rich communities.
“There has to be equitable access,” Mr Froman said, highlighting the consortium’s focus on “last-mile delivery” to ensure that rural and poor communities globally have access to treatments. (Gillian Tett, Kristen Talman and Billy Nauman)
Coronavirus crisis covers environmental sins
Moral Money has covered companies’ efforts during the coronavirus crisis to help their workers and communities. But companies are also citing the pandemic to lobby for deregulation that is directly opposed to the “E” in ESG.
Take the US Plastics Industry Association, a lobbying group. In a March 18 letter, the group asked the Trump administration to halt state-level plastic bag bans; in a letter to the White House it appealed to “stop the rush to ban these products by environmentalists and elected officials,” arguing that reusable bags carry viruses and bacteria.
In 2019, the plastics association drew attention when Pepsi and Coca-Cola said they were leaving the organisation. The group is chaired by an official at BASF, the world’s biggest chemicals company. The German group said in a statement to Moral Money that “plastics help to increase efficiency by saving resources in production and use phases, and they can and should be recovered at their end of life”.
Other polluting industries have also won regulatory breaks amid the crisis. The US Environmental Protection Agency has said it will not enforce certain environmental regulations during the coronavirus outbreak — citing staffing shortages and social distancing requirements that may make it difficult for companies to “meet enforceable limitations on air emissions and water discharges, requirements for the management of hazardous waste, or requirements to ensure and provide safe drinking water”.
The temporary policy does not apply to any criminal violations, the EPA said, nor does it apply to imports, especially pesticides that claim to address Covid-19.
Most striking of all, on Tuesday, the Trump administration rolled back tough car emissions standards approved under President Barack Obama. This provoked a rare public rebuke from Mr Obama, who pointed out that this would threaten public health (just as the pandemic broadens). It may also undermine the investments that Ford and General Motors have already made to develop electric cars. Expect protests once the Coronavirus crisis subsides. (Patrick Temple-West)
CEOs propose six principles for life after Covid-19
How should business leaders manage the economic fallout of the coronavirus crisis and start planning for an eventual recovery? Four senior executives and Klaus Schwab, the World Economic Forum founder who featured in Moral Money last week, are proposing an answer to that question in a call to action to their peers that they plan to publish on Wednesday.
Six principles will be needed if a market-based recovery is to replace an economic standstill in which governments and central banks are playing the decisive role, write Brian Moynihan, Bank of America’s chief executive, Jim Snabe, the chairman of Maersk, Feike Sijbesma, honorary chairman of Royal DSM, and Jesper Brodin, chief executive of Ikea.
They describe these “stakeholder principles in the Covid era” as follows:
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keeping employees safe;
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securing “shared business continuity” for suppliers and customers;
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maintaining fair prices for consumers;
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offering businesses’ “full support” to governments and societies;
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protecting companies’ long-term viability for shareholders;
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and continuing to pursue long-term sustainability goals “unabated”.
The authors are asking the 140 members of the WEF’s International Business Community group to sign up to these stakeholder principles, which they are also distributing to government, NGO and institutional leaders.
In the latest rallying cry for stakeholder capitalism, they write: “As business leaders, we pledge to stand at society’s service, to help preserve and rebuild a viable society and economy, and to do all we can for our stakeholders.” (Andrew Edgecliffe-Johnson)
BlackRock sticks to its guns
A few weeks ago BlackRock insisted that the coronavirus outbreak would not derail its plan to hold companies to account on climate change and corporate governance issues. It was met with a fair dose of scepticism yet, so far, the world’s largest money manager is living up to its word.
Since the beginning of March, BlackRock has voted against re-electing the longest tenured board member of National Fuel Gas, a US natural gas distributor, over the company’s failure to disclose data on its climate-related risk. “Given the significant material climate risks for the company . . . we would have expected the company to be farther along in its reporting,” BlackRock wrote in a bulletin explaining its decision.
Such votes are a wake-up call that BlackRock is serious about following through on its new focus on climate risk. “Calling out certain companies in this manner serves as a shot across the bow,” Amy Rojik, national assurance partner at BDO, told FT Specialist publication Agenda.
But BlackRock is not just focusing on climate. The fund company also voted in support of a shareholder resolution to declassify the board of National Fuel Gas, stating that annual elections were a better way to keep directors accountable for their actions.
This month it also abstained on a vote to re-elect two board members at shipping giant AP Moller-Maersk over issues with its executive compensation package. It also voted against a say-on-pay measure at US tech company Qualcomm and voted against the top member of its compensation committee because it did not believe the company’s bonuses were in line with shareholder interests. This is striking — particularly as the US annual general meeting season kicks off. (Billy Nauman)
Coronavirus bonds debut in Europe
The Nordic Investment Bank has issued a €1bn “response bond” to fund loan transactions to fight the economic sting from the Covid-19 pandemic.
The euro-denominated, zero-coupon bonds, which offer a negative yield, will help pay for unemployment, sickness and child or elderly benefits. The bonds will also help banks lend to small- and midsize businesses suffering during the pandemic.
“The NIB Response Bonds will finance eligible projects that aim to alleviate the social and economic consequences of the pandemic in the Bank’s member countries,” the Helsinki-based lender said. (Patrick Temple-West)
Tips from Tamami
Nikkei’s Tamami Shimizuishi keeps an eye on Asia to help you stay up to date on stories you may have missed from the eastern hemisphere.
Tokyo’s streets have finally gone quiet, weeks after big cities in the US and Europe shut down most business activities and ordered people to stay at home to contain the coronavirus pandemic.
Yet despite Tokyo’s governor calling on people to avoid gatherings, some companies have still been holding their annual shareholder meetings in the city’s hotels. Why? In Japan, companies are required by law to set a venue for their annual shareholder meeting in advance. So far, they have not been allowed to move them 100 per cent online.
“[We] asked the government to allow us to move the meeting online as a preventive measure, but [we] failed,” tweeted Hiroshi Mikitani, chief executive of Rakuten.
As a result, the Japanese ecommerce conglomerate held its annual meeting on March 27 at a hotel in Tokyo. It encouraged its shareholders to stay home and vote online but not everyone heeded this suggestion, as small investors see annual meetings as a rare opportunity to put questions directly to executives. Many shareholders did not want to miss their chance to be heard, especially when the company’s stock price has been lagging behind and parts of its strategy are under scrutiny.
Attendance was down 80 per cent from last year’s meeting, but nearly 200 people still showed up, according to Nikkei.
Unless Japanese regulators follow the lead of their US and European counterparts and allow for fully virtual meetings, it seems unlikely that shareholders will stay properly socially distanced.
Smart Reads
Jens Ulltveit-Moe, founder and chief executive of Umoe, a Norwegian investment company, sold all of his fossil fuel holdings 15 years ago and put his money into renewables. How has that worked out? He may not have done as well financially as he would have done by staying the course, but he said he was glad he made the switch. “As a businessman, I recognise my decision to sell out of my oil interests was perhaps made too early,” he said. “But as a global citizen, I see progress in investment and the switch to clean energy is coming too late.” Read his story here as part of the FT Special Report on The Future of Energy.
Further Reading
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Mastering the art of sustainable architecture (FT)
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Barclays targets net zero carbon emissions by 2050 (FT)
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ESG Stock Resilience Is Paving the Way for a Surge in Popularity (Bloomberg)
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Capitalism rewired: why we must rethink how performance is measured (FT)
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Virus puts responsible capitalism to the test (FT)
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Levi Strauss bets moral mission can survive public markets (FT)
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Guy Fieri Launches Relief Fund to Give $500 Checks to Restaurant Workers Affected by Coronavirus (People)
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‘This is the right thing’ — PayPal is the latest company to take a no coronavirus-layoffs pledge (CNBC)
