Stakeholder capitalism in the spotlight: How has COVID-19 changed institutional investors’ approach to ESG?

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The COVID-19 pandemic has far-reaching implications for public health, individual behaviour, and the global economy. Its tumultuous implications are only starting to be understood, while the reverberations will continue for years to come. One outcome that is already clear is the increased centrality of Environment, Social and Governance factors, or ESG, to corporate strategy.

The pandemic has driven calls from multiple organisations, most notably the World Economic Forum, for a “Great Reset” in which companies develop new practices and business models that enable them to build back better via low-carbon production methods and a more sustainable overall approach. Some businesses are already adapting, including oil major BP which announced in August 2020 that it would reduce oil production by 40% and increase renewable energy spending 10-fold by 2030 with the goal of becoming a net-zero emissions company by 2050.

ESG has been elevated in importance by increased corporate action, and also by the efforts of national and international policymakers, financial regulators, stakeholders including company employees and customers, and among shareholders. This last audience is the primary focus of this report which explores new FTI research into institutional investors’ approach to ESG.

This paper covers three topics:

  • An overview of key trends in E, S and G during 2020;
  • A review of FTI’s new research findings which demonstrates how institutional investors have increased their focus on ESG in the course of the COVID-19 pandemic;
  • Recommendations for corporations – regardless of past ESG performance – on ways to effectively evolve their approach to sustainability in the light of this new reality.

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