Right now, the world has caught COVID-19 – and sadly, many businesses face insolvency.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
And the stock market?
Apparently, no one has told Mr. Market that we’re enduring a pandemic, because it has shot up to new highs in a sort of twisted midsummer night’s dream—at least for investors.
What The Next Generation Of Investors Want
Through the challenges of this year’s pandemic, we’ve seen firsthand what it takes to move an entire society in a unified direction in order to conquer a deadly foe: honesty, transparency, empathy, and communication. However, we haven’t seen much of any of those traits, which helps explain our newly-spiking states unable to create unified action; and yet, those values are exactly what the next generation of investors is clambering for.
What’s there to be honest about in investing, you might ask? We live in unprecedented times, in a newly transparent world where we can peer into the windows of companies to see whether or not today’s brands are being honest—about what’s going on in the world, what’s happening in the minds of consumers, and what’s occurring within their own ranks of employees, partners, and customers.
As a society, we’re growing increasingly aware about workers’ rights, social justice, climate change, and more…because we now know how companies are taking a stand on these issues, or not.
The Coronavirus Pandemic Would Be Positive For ESG Momentum
In fact, a recent investor survey, with participants totaling nearly $13 trillion in assets under management, found that more than 70% believe unforeseen events like COVID-19 will spark investor interest over tackling issues like the climate crisis. And more than 50% said the coronavirus pandemic would be positive for ESG momentum over the next three years.
This makes sense, since, with more information, we investors will invest more thoughtfully and in places that align more closely with our values. After all, we investors have reputations to protect, too, and no one wants to be responsible for taking our bright future away from future generations.
In a way, the coronavirus pandemic has accelerated the ESG movement faster than any of us might have imagined, since it’s given us more free time to research, a bigger spotlight on what companies are doing in a crisis, and a rare opportunity to step back as a community to ask ourselves how the public and private sectors help or hinder us lowly consumers with their beliefs, values, and actions.
Caring About How Companies Do Business
Meanwhile, thanks to organizations like JUST Capital, we can measure outcomes based on ESG factors like never before, with the research showing that companies that act more justly—more honestly on issues important to the consumer public—earn a return on equity (ROE) that is 6.4 percent higher than peers who don’t rank well on matters like workers’ rights, environmental issues, and more, giving organizations a real monetary incentive to start caring about not only what they do, but also how they do it.
Fortunately or unfortunately, depending on your organization, ESG trends will only grow until they become not a factor but the factor in how we invest our time and money, both as investors and as more thoughtful consumers. It is inevitable because, as I’ll paraphrase from one of the CEOs I interview in my book, folks behave differently in the light than they do in the dark.
The coronavirus pandemic has shone a gigantic light onto the behaviors, norms, and beliefs of companies here in the United States and around the world. When a spotlight hits your portfolio, what will it show? No matter what, history will be on the side of honesty and transparency here, if for no other reason than we now have more knowledge and awareness about ESG-type issues than ever before.
And, as with all types of knowledge, once we know, there’s no going back.
About the Author
Peter Kozodoy is an Inc. 5000 serial entrepreneur, TEDx speaker, and business coach who works with organizations and their leaders to help them overcome self-limiting bullsh*t and use honesty to achieve greatness. His articles on leadership and entrepreneurship have appeared in Forbes, Inc., HuffPost, PR Daily, and more. He holds a BA in economics from Brandeis University and an MBA from Columbia Business School, and lives outside New York City with his wife and their spoiled dog. To strike up an honest conversation, visit PeterKozodoy.com.