This week I’ve been reflecting on what it’s been like to work from home, as well as thinking about my friends and family who have been furloughed or are at risk of redundancy. Thanks to Boris Johnson’s announcement last Sunday it appears the elephant in every board room is how to manage getting employees back to the workplace, whilst also keeping everyone safe. World leaders and business owners alike are understandably concerned about the effects the pandemic could have on the economy and the potential long-term damage. We’ve heard in the news that unemployment has reached Great Depression level in the US and there’s a media lens permanently focused on how companies are reacting during this time of crisis.
On 24th April it was the 7th anniversary of the Rana Plaza disaster in Bangladesh, where over 1,000 individuals lost their lives as a garment factory collapsed. This year it increased the focus on criticism of a number of global fashion companies who, due to the current crisis, reneged on orders, even those that had been completed or had even been shipped already, and refused to pay for the goods. All of a sudden this left companies and workers in turmoil and even more unsure of their futures in a time of global crisis. To put this in perspective, in Bangladesh – the second largest garment manufacturing country in the world – clothing makes up 84% of its global exports and millions of workers depend on this industry. The amount of bad press quickly led companies to change tactic and honour their commitments as much as possible.
Meanwhile companies like Google have offered their employees a free extra day of holiday to combat the burnout and stress of working from home in difficult circumstances, and Twitter have vowed to be more flexible on working from home in future. In general, stories of corporate do-gooding have gone down well, and we all know there’s an understanding that in dark times we band together and help each other out and that now includes giant corporations as well as local businesses and communities. An article I read recently with my morning coffee suggested that this could constitute ‘Coronawashing’, in other words some of these companies don’t actually care about employees and customers all that much but know that pretending to do makes them look good. I quite often lean towards cynicism myself, however, in this case I have my optimistic hat on. I think that, as long as the actions taken are genuine, then more corporations and businesses will begin to take an interest in employee wellbeing and stakeholder opinion.
Why am I talking about all this? Simply because corporate governance is an important consideration in our Responsible Futures portfolio.
A changing culture
As far as I know, it seems to generally be good investment practice to look for companies that are robust, resilient, and responsible with their cashflow. The Responsible Futures portfolio focuses on two main themes; People and Planet. As people, we have all been concentrating recently on how to take care of one another and this principle governs the selection of underlying investments in the portfolio. The goal is to increase attention on the interests of all stakeholders (everyone involved and impacted by the business) and not just the important shareholders. Our portfolio managers at Canaccord Genuity and each of the teams running the underlying funds take great care to consider how the companies they invest in react with their employees and the local communities. They also they look carefully at the company leadership, pay equality, audits, fair payment of taxes and the business controls in place.
There is an increasing awareness of good company culture that is influencing consumer choice and I know many friends and family who will carefully consider each purchase and make sure it corresponds with their personal values. One of the common arguments used to encourage investments in portfolios like our Responsible Futures, is the power of ‘Millennial Money’. The story goes that this generation (myself included) will start making more money or inheriting and increasing their spending power, however many of us (obviously myself included… I think you get the picture here) are going to be much “choosier” about where we place our money. The current crisis has arguably been accelerating this change in attitude as we are encouraged to support each other and work as a community for positive change.
One of the fund managers in the Responsible Futures portfolio, Montanaro Asset Management, have also been producing weekly updates and I’ve loved reading about their charitable collaboration with City Harvest in London as part of their mission to ‘Do Good Deeds’. They donate a portion of their revenue to charity and have been inspired by City Harvest’s mission to provide food to those in need, which has been more important than ever. Christian Albuisson, head of the ESG Committee highlighted that “At Montanaro we spend time looking for the highest quality businesses in which to invest. Good corporate governance forms a core part of our quality definition. To some extent, corporate governance sets the entire ESG agenda. As we always say, in Small & MidCap it is management that makes or breaks a business”.
Where does it go from here?
As I said earlier, I’ve got my optimistic hat on today, which is so necessary at the moment. I’m clearly very passionate about creating a sustainable and responsible future and I’m so excited to see the increasing support and fervour behind this idea. I wonder how we become part of the solution rather than part of the problem moving forwards and I feel like this virus has given us time to rethink and reset. As everything has ground to a halt we can think about where we invest for our future. There have been resounding calls for government money not to go back to propping up the old oil and gas companies but to take the opportunity to promote clean energy and travel.
It’s going to seem like all I’ve been doing is reading recently but in a recent interview with Thomas Picketty author of Capital in the Twenty-First Century, I found an analogy that, as a self-confessed History geek I really liked and wanted to share. Piketty discussed an idea from his book; that major crises such as world wars or pandemics are often a driving force for economic change and explained the theory that the Black Death in the 14th century effectively ended serfdom. Essentially with up to 50% of the population wiped out in some regions, labour became scarce and enabled the remaining workers to secure better rights and security. Of course, it’s not that simple and on the other side of the scale some areas actually saw an increase in serfdom because, due to the shortage in labour, the serfs became even more valuable property to landowners. Obviously, it’s an extreme example for today, but my point is that it will be interesting to watch if the likes of our Responsible Futures portfolio is on the right side of history (and economics!)
Lastly, as a shameless self-promotion but also under the guise of helping each other out I’d like to share a brilliant new development at Waverton. Jason Hemmings and the team have been developing a new service called snapshot pensions. It’s an entirely free, no obligation service which can be completed on-line in a couple of minutes. The service is available to anyone who has one or more pension arrangements and who wants to understand more about what they have. It’s not designed to be advice or financial planning, but we hope it will enable more people to learn about their pensions and how to plan for retirement where they might otherwise not have had access to this kind of service.
As the lockdown tip this week I also want to direct everyone’s attention to Smartworks. Despite the optimism, I do worry that a significant number of people will find themselves unemployed at the end of this and Smartworks helps women in need to prepare for interviews and develop confidence, as well as providing a much needed interview outfit as the final piece to the puzzle. They have helped over 15,000 women and work with organisations such as job centres, work programmes, prisons, care homes, homeless shelters and mental health charities.
You can find out about their work here https://smartworks.org.uk/ and might want to look at donating, supporting their cause or volunteering.
~ Ellie Maletto
Please note that the content of this letter is for information purposes only and should not be considered as a recommendation to invest in any particular investment strategy or any individual company.
Although our physical offices are currently closed, we are business as usual from home, and available by phone and email as always. Please get in touch!
