The Covid-19 crisis has forced us to ask ourselves all sorts of difficult questions – about ourselves, our government, our way of life.
Moving on from the existential stuff, though, the coronavirus pandemic will doubtless have made many people think about the companies that are part of their life. More specifically: which businesses do I want to be associated with, either as a customer or investor?
In the darker hours of recent months a card, book or bunch of flowers through the post from a friend has made my day. On two occasions the arrival of a box of craft beers has made me particularly happy. Yes, it’s fair to say that the postman has become one of my favourite people to see over lockdown (apologies to my husband). It’s no wonder then, that any company that can deliver to your door has seen its share price soar.
But at what cost?
At Morningstar, we think about ESG investing a lot. Companies that score well on environmental, social and governance factors undoubtedly look set to thrive over the long-term, and the evidence is really coming through that investing in this way doesn’t mean compromising on your financial returns either.
So if I want to invest in ESG-friendly companies, I should probably try to use the products and services of ESG-friendly companies too. And the coronavirus crisis has shown that those companies may not be the ones you thought they were.
Arguably, Amazon’s next-day delivery service has had a positive impact of many lives across the globe at a time when some people have not been able to leave the house. But what about the safety of its workers? If I was able to get that novel with the great reviews within hours of ordering but someone else was put at risk in the process, that’s probably not ticking the positive impact box any more.
Andrew Willis’s excellent dissection of a Sustainalytics report this week made for thought provoking reading. Hundreds of controversies have arisen in the Covid-19 crisis and, in the end, I think it will be the companies that were able to serve not just their customers but their staff and communities that will be the winners of this pandemic.
Social Impact Matters
On a similar topic, you may have noticed we’ve had something of a (well-timed, you could argue) ESG week here at Morningstar Towers. Every time this topic comes up it seems there is more and more to talk about.
Tancrede Fulop’s look at the companies that have gone above and beyond in the crisis was full of surprises. You may know Pernod Ricard as the purveyor of tasty alcoholic brands such as Jameson Whiskey and Malibu, but these days its distilleries are making hand santiser to help the Covid-19 cause.
These have undoubtedly been some of my favourite investment stories of recent months. Whether its Barbour swapping out production of its wax jackets to make surgical gowns for hospital staff, or Burberry ditching its famous checked coats to make surgical masks. Elsewhere we’ve seen Tesco give a bonus to its staff who worked through the worst of lockdown and beer giant Heineken promise no lay-offs will be made, even if sales are falling.
The E in ESG has largely been the bit in the spotlight until now, with climate change top of many an agenda. But increasingly people are starting to recognise the previously overlooked S of ESG, the social aspects. And it's measures made during times of crisis such as these that will really show who are the trailblazers in this space.
Decisions, Decisions
This week, as promised, I finally got around to tinkering with my investment portfolio. I decided the whole thing had got a little unruly and needed streamlining, so have cut the number of funds I hold down by a third.
I’m pretty happy with how it’s looking at the moment, apart from one holding that’s sitting well in the red but which I (probably foolishly) refuse to cut my losses on just yet – don’t tell Dan Kemp!
But there’s one fund I’m in a quandary over. It has done incredibly well, not just this year but in the three years I’ve held it. And I’m faced with the question: can this excellent run continue?
There are two possible strategies here. The first is to keep running my winner – if I still believe in the fund and the manager, and the themes that have helped it along are still in place, then I should continue to back it. Others would say take some profits, don’t sell your entire stake but take some of the gains and put them to use elsewhere.
I haven’t decided yet.
