Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Social

The future of work and the potential new investment opportunities

  • 03 February 2021
  • 5min read

The coronavirus pandemic has put the ‘S’ in ESG – environmental, social and governance - firmly in the spotlight. There are significant implications for business models and the way that companies operate, as well as the future of how we work. Fiona Reynolds, chief executive of the Principles for Responsible Investment, a United Nations-supported international network of investors working together for a more sustainable global financial system, spoke to AXA IM clients on the issues facing companies and asset managers - and the potential new investment opportunities.

Investors have often started their responsible investing journey with a focus on governance, but over the last five years we have seen a strong move towards climate. As a result, social issues have been left behind - however the pandemic is helping to change this.

COVID-19 is exposing many weaknesses and biases that have been built into our social fabric. We can see this in the growing socio-economic divide and polarisations within populations. Many people feel they are being left behind and that the wealthy are getting wealthier while the poor are getting poorer.

Companies have had to get everyone working from home quickly, so the pandemic has also emphasised the need to create an economic model that works for everyone.

The 'S' in ESG

Getting it right

Employers have had to rethink their workplace models, to ensure revenues continue while also protecting workers. They have had to move to not just thinking about the immediate physical health and safety of their employees but also their mental health, ensuring they have access to the right tools and policies.

The pandemic has also highlighted a broader range of issues such as precarious work situations that had arisen as result of the ‘gig economy’ including zero hours contracts. Workers who have no basic entitlement such as sick pay end up going to work so they can pay their bills - in doing so the virus has spread and that has impacted us all.

Another area investors have focused on is supply chain management, which can be a challenging issue for businesses of all sizes. In the past supply chain management has tended to focus on efficiency, for example reducing inventory levels. But during the pandemic orders were often cancelled at very short notice, triggering force majeure closures. This has had far-ranging impacts on the wider supply chain and on the workers in the chain especially those in developing countries with no government social safety net.

Best practices versus company challenges

There has been a lot of good practice for example in the food and beverage and retail sectors. One supermarket chain reduced its payment terms from 14 days to 48 hours to help around 3,000 small suppliers, which was a lifeline for a lot of them.

In the meat processing sector in Singapore we have seen the early implementation of social distancing protocols, working from home where possible, the provision of good protective equipment and advice given in multiple languages. On the other hand, there were issues at some production plants elsewhere where there were reports that staff did not respect social distancing, weren’t wearing masks, and were going to work when they were sick.

The new normal

One of the new trends that will continue is working from home. This is challenging for businesses as it does require different management skills. Companies will really have to think about how to engage employees, keep loyalty, and build culture when people don’t come together. Firms also need to consider how they think about improving healthcare in the workplace, including mental health.

The recent Edelman Trust Barometer1 showed business is now more trusted than government – businesses are now the only institutions seen as both competent and ethical. Interestingly it also shows that peoples’ biggest fear was not the pandemic itself or getting ill with coronavirus - it was about job losses. Employers need to give as much certainty as they can, which very difficult in these uncertain times.

The generation gap

Many studies, as well as my own experience, show that young people are very concerned about ESG issues, particularly the environment, diversity and fairness in the workplace - and that they want to work for ethical organisations. To attract the best people in business now, it’s not just enough to dangle the paycheque, you need to demonstrate what your responsible employment policies are and how you put them into practice.

Because of this disruption, on-the-job training and making sure people are well integrated into the organisation is going to be essential, but it’s much harder to onboard people when you’ve never met them face to face.

Assessing the social pillar of ESG

In the environmental aspect of ESG we have been able to focus on metrics and measurable key performance indicators. This is arguably more difficult in the social sphere; it is harder to get that data but that is starting to change. We are working with a lot of organisations regarding how we build up the right metrics, and how we get meaningful and usable data for investors.

I don’t think we should let the perfect be the enemy of the good - we need to recognise there is still a long way to go, but there are good things happening in areas like gender diversity in terms of gathering information. But gathering information is one thing - it’s about what we then do with that data. We need to see some long-term change.

There is far more pressure on investment managers and asset owners to know not just what happening within their portfolios but also within their own organisation. With so much happening around Black Lives Matters and evidence of more of the black, Asian and minority ethnic communities being affected by coronavirus in some areas, it is good to see how businesses have stepped up and started talking about these issues. I don’t think these problems can be solved without the private sector – it has such an important role to play, and we can’t tell companies what to do and not do it ourselves.

  • 2021 Edelman Trust Barometer | Edelman

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.

    The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.

    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.