COVID-19 – putting the economy in the recovery position

In the immediate future, governments, companies – and individuals – must focus on the COVID-19 health crisis.

On Friday, the UK government is opening a 4,000-bed hospital in London’s East End, following similar efforts by the Italian, Spanish, French and Chinese governments – and belatedly, the US. A remarkable achievement for all those involved, and one we hope will provide the healthcare capacity we need as the crisis peaks.

And so, our thoughts turn to those directly impacted by COVID-19 – the healthcare workers, carers, cleaners, delivery drivers, and thousands of people saving lives by putting food on supermarket shelves, collecting our rubbish and keeping our streets safe – those we’ve too often taken for granted.

At the PRI, we’re working to support our staff, suppliers – and of course – our signatories.

But we’re also beginning to think beyond the immediate health crisis, because following this, there will almost certainly be an economic crisis – one that’s already playing out in jobless claims and market volatility. This economic crisis will have profound consequences for all of us but will hit those already vulnerable even harder. Decades of failure to address economic inequality will be made apparent. This is the time to rethink unsustainable systems and behaviours – in particular for the responsible investment community.

At the PRI, we believe that we owe it to our savers and beneficiaries to ensure the economic recovery is a sustainable one – consistent with net-zero carbon emissions by 2050 and mindful of the private sector’s responsibility to respect human rights. We need to emerge from the health crisis, better placed to solve the climate emergency while ensuring inclusive societies. We want your help to do this.

The PRI has established two signatory participation groups to develop investor responses to the pandemic. One, looking at short-term responses, and another a future economic recovery phase.

We’re inviting all PRI signatories to contribute: find more information on the PRI Collaboration Platform.

And there are green shoots.

In recent days, EU policy makers have made it clear that the recovery must support the EU’s climate law, despite opposition by some Czech, Polish and opposition German politicians. And EU securities regulators have banned short selling in an attempt to stabilise capital markets, a position that some investors have long called for.

And in the US, the $2 trillion stimulus package, the largest in US history (more than the 1.4 trillion following the 2008 financial crisis, noting 2 trillion is only the start), included conditions for companies receiving bailout financing on wage rises, wage cuts for the highest earners, employment retention and share buybacks. On short selling, the SEC was forced to defend the ‘uptick’ rule.

But what are the long-term implications for securities regulation? And fiscal and monetary policy?

Could, for example, the “oil-price war” be the end for fossil fuel subsidies? Does COVID-19 mark the end of peak aviation? Will we rediscover the value of strong public health systems? What about the gig economy and the current price we pay for precarious work conditions? What about the effect of global fashion brands stopping, or even recalling, their orders from suppliers immediately putting workers out of jobs and into destitution? And what about the decade-long erosion of government tax bases which we all, especially during a crisis, so dearly rely on?

And what are the economic consequences of COVID-19 on the poorest countries? A recent Economist article highlighted frightening consequences of the disease in Africa – including low immunity due to HIV, TB and malnutrition, low healthcare (in particular, ventilator coverage), close-contact living, and a global financial system which does not allow for increased borrowing.

And what does this mean for investment practice?

The PRI has shared initial thoughts on stewardship in the response to COVID-19, but the implications on corporate and financial activities are likely to be significant and lasting.

Putting some sense to this is where we need your help – as individuals and as investors. What are your recommendations for the PRI, responsible investors, our stakeholders and policy makers in the post-COVID-19 recovery? Now more than ever, we need to implement Principle 5 – “we will work together”. So, let’s put our thinking caps on.

Log on to the Collaboration Platform today – and tell us what you think.

 

 

This blog is written by PRI staff members and guest contributors. Our goal is to contribute to the broader debate around topical issues and to help showcase some of our research and other work that we undertake in support of our signatories.

Please note that although you can expect to find some posts here that broadly accord with the PRI’s official views, the blog authors write in their individual capacity and there is no “house view”. Nor do the views and opinions expressed on this blog constitute financial or other professional advice.

If you have any questions, please contact us at [email protected].