Companies, collaboration & COVID-19: Championing saver views

Among the many realisations of the past year-and-a-half has been a growing awareness of the interconnectedness of environmental, social and governance (ESG) issues by investors and savers alike.

Not a zero-sum game

There’s no binary choice between planet, pandemic or people – tackling one issue is tackling them all. Nonetheless, the COVID-19 pandemic has shone a spotlight on social issues and healthcare.

To this end:

• LGIM teamed up with the Access to Medicine Foundation and AXA Investment Management during summer 2020 to lobby global pharmaceutical companies and ask them to take practical steps to accelerate R&D on COVID-19 medicines and vaccines. This includes sharing intellectual property, working with governments across the income and development spectrum and pooling manufacturing capacity
• We’re part of the Investor Action on Antimicrobial Resistance initiative, pushing for collaborative action against drug-resistant superbugs, which we see as a key potential global economic and social scourge, and the next possible pandemic
• We support the ‘One Health’ approach recommended by the World Health Organization (WHO) where governments, NGOs, healthcare operators and investors work together on initiatives to achieve better public health outcomes and more positive societal outcomes

And our members agree with our actions. As 80% of savers highlighted to us in a recent survey of over 3,000 defined contribution scheme members, fairer health outcomes require a global sharing of resources. DC members were pleased to learn about our engagement on their behalf, with those working in directly affected sectors such as Health the most strongly in favour.

Health is wealth…

As our research also uncovered, savers are no less aware of the broader societal impacts of the pandemic, on employment and income inequality. In fact, for many members, the pandemic may have been the first time they made the direct link between environmental, social and governance issues (ESG) and their own lives, as ESG issues were brought alive by their own experience, or that of others close to them. Those interviewed were very supportive of the government’s furlough scheme, with three-quarters championing financial assistance now, even against the prospect of future tax hikes.

So we think it’s out of sync that in a year when many companies have taken up the furlough scheme, with a 20% pay cut, or even redundancy for certain employees, some have simultaneously paid (or intend to pay out) increased bonuses to some members of staff, many of whom are already disproportionately higher paid. As well as presenting a good example of how the issues created by the pandemic stretch beyond one area of ESG into company governance, these policies are widening the income inequality gap and something we’ve increasingly sought to address. We expanded our UK Principles of Executive Pay to emphasise that we will increase our scrutiny of those companies that have received support from government or shareholders and have protected executives – but not their lower-paid workers.  In 2020, we voted against 128 pay-related proposals.

… and wealth is health

With 56% of members stating that they feel more worried now about their finances than before the pandemic hit, it’s time that companies listened to the experience of their shareholders. It’s also a good example of how the issues created by the pandemic stretch beyond one area of ESG into another, such as company governance (the ‘G’ in ‘ESG’). Better governance in turn can help to generate a range of social benefits including workforce productivity, demand for goods and services, later-life stability and health for workers and even lower crime rates – a truly virtuous circle.