Corporate responsibility continues to mature and become mainstream - this is largely due to a shift toward “values.” At Howard Kennedy, our values of talking straight, thinking smart and being ourselves are very much embedded in the firm's culture, and this is the same for many of our clients and other companies too. 2019 has been the year that coined "profits with purpose". Companies are putting sustainability, environmentalism and social well-being at the forefront of their objectives, and this is here to stay for 2020 and beyond.
A company’s approach to its operations is a reflection of its values, as well as the values of its customers, employees and investors. Companies and their stakeholders are increasingly standing up for values such as inclusion, empathy and environmental preservation.
The shift has been accelerated by the current political climate, as well as the rise of the #metoo movement and the extinction rebellion protests, which have etched environmental and social concerns in many people's consciousness. Responsibility, humanity and sustainability are now more than ever entrenched in the corporate sector - and we are confident that this is not a passing trend.
Corporate responsibility was not an innovation of 2019; we have seen it rise and fall many times over the preceding decades. Whilst there are individual successes, it has not resulted in a wholesale reduction in corporate misbehaviour… cue bank malpractices in part causing the global recession of 2008. "When companies are in trouble, cutting employee costs, whether by closing pension plans, shedding workers or offshoring activities to places where wages are lower, becomes irresistible." Or at least that has been the case previously.
What may possibly be different this time, however, is the response to climate change. Corporate responsibility in this regard may be here to stay. Principally, due to climate change, protestors having mobilised millions around the world – they have pressured governments and investors to act.
Investor interest in environmental, social and governance (ESG) factors has gone mainstream, with socially responsible investing gradually becoming the new normal.
Green funds are on the rise – funds or other investment vehicles that will only invest in companies that are deemed socially conscious in their business dealings or directly promote environmental responsibility. A green fund can come in the form of a focused investment vehicle for companies engaged in environmentally supportive businesses, such as alternative energy, green transport, water and waste management, and sustainable living.
Many of the largest companies now file sustainability reports. Whilst this is not news, there is a sharper focus on using this information as a basis for investment decisions. A recent study from Oxford University found that more than 80% of mainstream investors now consider ‘ESG’ – environmental, social and governance – information when making investment decisions.
Such uptake is compelling - globally, there are now $22.89 trillion of assets being professionally managed under responsible investment strategies, an increase of 25 percent since 2014. The scale of such investment is so large it requires context – it exceeds the GDP of the entire US economy.
Clients are no longer having to decide between being true to their personal values or achieving a return on their investments. Many UK equity funds have been assigned an 'ethical' flag and they compete in terms of returns with their non-socially responsible peers.
All of this means that we concur with Jamie Dimon, chief executive of JPMorgan Chase, when he says that "building shareholder value can only be done in conjunction with taking care of employees, customers and communities". We hope that the next decade sees a sustained shift towards companies looking after the wider world, as the climate issue will not go away.