The coronavirus pandemic has created a unique situation for markets forcing companies to close their doors and completely rethink how they will carry on their businesses.
Whilst many are fortunate enough to transition to working from home others are not so lucky and face a stressful and uncertain time regarding their job safety.
But working from home or not everyone is being challenged with harsh lockdown measures, meaning that their commitment to ESG – environmental, social & governance issues – will be properly tested according to Rathbones David Harrison.
The manager of the £12.2m Rathbone Global Sustainability fund Harrison (pictured) invests in companies who strongly support and implement ESG policies in their businesses and are now facing greater scrutiny.
The popularity of ESG strategies was seen last year as net retail sales of responsible investment funds hit £3.2bn while funds under management stood at £27.4bn at the end of 2019, according to the Investment Association (IA), as investor awareness of the strategies grows.
“Before it’s often been easy to [talk about] this [ESG] stuff,” said Harrison. “When things are going well [you’re] thinking ‘I can cover my annual report slides in this ESG stuff’.
“But as you speak to businesses [and] suddenly everyone has to switch to working from home and that means the biggest companies now have to explain how they are [supporting workers].
“The little things like how they reach out to their employees; giving them the laptop to be at home; the calls, and making sure people are included. This is a massive test.
“I think it’ll be interesting to see who are the ones that do deliver and who are the ones that don’t.”
He added “We’re finding that they’re being really proactive companies; they’re all reaching out. 
“We’ve heard stories about all the support they provide for their employees, how they think about suppliers, all the people that’re impacted by this,” which Harrison said shows a strong and healthy ESG culture can work.
Whilst the tragic impact of the coronavirus pandemic cannot be understated one consequence of it is getting lost, according to Harrison: the positive impact on the environment and emissions.
Research carried out by index provider MSCI they found that due to the coronavirus-inspired lockdown of the global economy global emissions for 2020 could decrease by 2.1 per cent compared to 2019.
Totalling a reduction of 8.3 per cent decrease from what the emission levels might have been without a decline in economic activities in Q1, according to Oliver Marchand, head of climate risk research at MSCI.
Looking at China specifically – the so-called ‘factory of the world’ and biggest contributor to carbon emission levels – Marchand said that levels of nitrogen dioxide (NO2) have dropped whilst the country was in lockdown, as shown below.
NO2 atmospheric levels over China from Jan. 1-20, 2020, compared to Feb. 10-25, 2020.
Source: NASA Earth Observatory and MSCI
“We could potentially see the same effects in other countries that have implemented a nationwide lockdown and closed their borders,” Marchand said.
And although this reduction might not be enough to bring us right down to the 2050 net of zero emissions target this is perhaps the opportunity the world needed to make the permanent changes necessary to achieve this, according to Rathbones’ Harrison.
“As we slow down, perhaps you will see the benefit to the world,” the Rathbone Global Sustainability manager said. “Perhaps this is the point where we have an opportunity to re-build,. you know, there will be changes to the way we work.
“This is the point where – if we are having a green revolution – now’s the time perhaps to accelerate that and we all need to go [and change],” adding that hopefully some good changes to everyone’s daily routine and habits can come of the lockdown.
During the recent coronavirus-inspired sell-off Harrison said that he has changed very little in his portfolio topping up pre-existing holdings, especially in the healthcare innovation and infrastructure areas. In addition, he has bought more of Microsoft and simulation software company Ansys, companies that he believes will benefit from the working-from-home transition.
However, there were some new names added to the portfolio, particularly in the healthcare innovation space, which have given the fund “the potential exposure to providing solutions to all of these events.”
These companies included Edwards Lifesciences –a world leader in heart valve replacement technology – and Clorox, which owns popular brands such as Bert’s Bees and Brita but its main focus is disinfectant wipes and home cleansing products –, an obvious trend at the moment, said Harrison.
Since launch in July 2018 until the market peak on 19 February this year the £12.2m Rathbone Global Sustainability fund has made a total return of 16.68 per cent, outperforming its IA Global peer group (13.68 per cent) but underperforming the benchmark FTSE World index (17.89 per cent).
Fund performance versus sector and index since launch
Source: FE Analytics
Despite the heavy sell-offs of March the fund has returned 2.95 per cent, better than its sector and index comparatives who are posting losses of 4.33 per cent and 1.61 per cent respectively since the fund’s launch.
The fund has an ongoing charges figure (OCF) of 0.90 per cent.