ESG OUTLOOK (part 3)

A sustainable economic recovery:
all stakeholders teaming up for the common good

by Ophélie Mortier,
Sustainable & Responsible Investment Strategist at DPAM


COVID-19 emphasized the social factor -and in particular human capital- as a key pillar of the company. It is the employer’s responsibility to put in place preventive and protective measures for its workforce. On the one hand, these secure the continuity of economic activity, and on the other, they also ensure employee support. Employees feel personally involved, since they are an integral part of the project. As such, they want to contribute to it.

It is interesting to compare the situation of employees in Scandinavia to that of workers from some large retail stores or giants like Amazon. The former are looking forward to return to work, safe in the knowledge that the necessary precautions have been taken. Meanwhile, the latter have refused to go back to the workplace due to a lack of guarantees on health risk prevention. Trust is usually not built in a matter of days. Instead, it requires repeated confirmation at multiple points in time. As such, it will be interesting to both look at the impact of Amazon’s latest workforce-protection measures, and consider how to reward the staff for its efforts. The amounts Amazon put aside for its COVID efforts are colossal (USD 4 billion). However, the measures are more reactive than proactive. How will this influence the return of employees to the workplace in the short term, and to what extent will this affect their loyalty and profitability in the medium to long term?

Towards automation?

Greater automation can also solve the problem of business continuity, as machines are inherently resistant to pandemics and viruses. It is clear that the process of automation is already well underway. This process will continuously improve over the years, as it responds to the dual problem of offshore outsourcing and protection against health risks. However, machines are not the answer to everything. They do not replace the individual. As we face the prospect of continued automation, we should prepare our economic sectors and our children accordingly. The OECD’s latest PISA study wanted to focus on the adequacy of the education system and the evolution of the labour market. Unfortunately, the OECD’s survey finds that nowadays, the majority of students are poorly prepared for tomorrow’s jobs. Although the labour market has undergone major changes in recent years, our educational practices have not kept pace.

15-year-olds’ career aspirations generally coincide with 19th and 20th century job profiles, rather than 21st century ones. This may also be caused by the appearance of multiple new jobs, the existence of which few could have anticipated. In turn, it makes it hard to aspire to them. It should also be noted that differences in gender and socio-economic background also greatly influence young people’s ambitions. For example, boys are seven times more likely than girls to express aspirations in the field of information, communication and technology.

Risk of automation of expected job, by gender, 2018

Source: PISA 2018 and survey of Adult skills (PIAAC) 2012, 2015 database

Few countries today can boast that their schools’ curriculums align with the professional needs of today and tomorrow.

The financial crisis of 2008-2009 has had disastrous consequences for the health and education sectors, which were the first to be affected by national budget cuts. Hopefully, the current crisis will not lead to the same (or worse) mistakes. One does not necessarily need to rely on massive spending to guarantee the quality of the education system, or to ensure that it adequately prepares students for the current and future needs of the labour market. However, drastic cuts in an already-strained budget would do little to improve the situation.

This brings us to the role of governments.

At a time when international cooperation has become a sine qua non, the behaviour of countries -both at a global and EU level- has swiftly demonstrated that dialogue and the pursuit of a common objective is not currently on the horizon.

And yet, several institutions have issued announcements in favour of a sustainable recovery. Among others, on March 26, the European Council’s joint declaration pushed for the integration of a green transition into the economic recovery plan. The Green Recovery Alliance called for a similar initiative on April 14, advocating that the European Commission’s Green Deal should be at the heart of our COVID-19 recovery plans. There are plenty more examples of such announcements. However, the public aid to the aviation sector illustrates the misalignment between words and actions. Should we therefore fear a drop in our current climate ambitions?

Political ambitions: delayed, but maybe not diminished

At the international level, China’s economic recovery does not bode well for the climate. Previously, the world’s second-largest economy adopted substantial policies and programmes to combat climate change and invested heavily in greener solutions. However, the country’s three-month standstill and the subsequent disastrous consequences for the economy seem to have diminished their environmental drive. Coal-fired power plants are reopening, factories are running at full capacity and the air quality in the megacities – which had benefited from a brief lull – is deteriorating again. These environmental sacrifices will have to sustain the average purchasing power of an ever-growing middle class. The country’s recovery plans do not focus on renewable energies but on heavy industry and the construction of new coal-fired power plants. As the government prepares to inject USD 7 trillion into its economy, its climate targets seem to have fallen by the wayside. China’s recovery is not driven by green investments.

The repeated provocations of the American President are no more reassuring for a green and sustainable recovery. After leaving the Paris Agreement, Donald Trump has now also left the World Health Organization. One can only hope that individual states, such as California, will succeed in putting green investment at the heart of their economic recovery, and offset the national image at the federal level.

Our hopes for answers that actually match ambitions and commitments are greatest at the European level. In recent years, the European Commission has shown its willingness to move forward on the issue of sustainability, the circular economy as well as sustainable and responsible investment. Jean-Claude Juncker’s Commission initiated this acceleration with its ‘Action Plan for Sustainable Finance’, its ‘Environmental Taxonomy’, and the regulation of low-carbon indices. Ursula von der Leyen’s Green Deal has now reinforced this foundation. This green outlook is essential for a sustainable and inclusive growth strategy.

2020 is the year of the (postponed, but not cancelled) COP 26, and marks five years since the adoption of the Paris Agreement. As such, 2020 is the milestone date by which countries committed to increase their nationally-determined contributions. Today, only a small minority has increased their commitments. The economic consequences of the pandemic suggest that this number will likely remain low. As originally planned, Glasgow will host COP 26, albeit one year later. Originally scheduled for November 2020, it would have taken place with Germany as EU president. Instead, it will now take place in November 2021, under the Slovenian Presidency.

The response of the financial system

Beyond the actions of governments and central banks, the crisis may also call into question the global financial system’s ability to meet the objectives of the new century.

We have learned many lessons since the 2008 global financial crisis.

    • In 2008-2009, sustainable and responsible investments were still in their infancy. The United Nations Principles for Responsible Investment (PRI) amounted to about USD 12 trillion, compared to almost USD 90 trillion today;

    • Regulation, both in terms of investor responsibility and company disclosure, has changed and improved considerably;

    • Sustainable and responsible investments now have a proven track-record of resilience in times crisis;

    • Technological developments have further accelerated. Not only do they create a multitude of new opportunities, but also reduce overall costs (e.g. renewable energies);

    • Stakeholder pressure has increased, and civil society is ready to take up the fight.


It is therefore necessary to continue to draw on the valuable lessons of the recent crises, including the current COVID-19 pandemic. It will allow us to maintain a medium- and long-term focus, and support cooperative actions for a more sustainable economic and financial environment. The financial system has a major role to play in our economic recovery from the pandemic. In addition, it can also ensure that this recovery is sustainable and includes all stakeholders.

Amidst this financing, the shareholder plays a key role, too.

Given the current exceptional situation and its equally exceptional measures, it may be advisable to approach certain governance principles with more flexibility than usual. Active dialogue with companies will enable us to be more receptive to their problems, be they temporary or not, and to adopt a shareholder decision accordingly, in alignment with a medium-term investment horizon. The COVID-19 crisis has also strengthened stakeholder governance as opposed to shareholder governance. That is, a philosophy where the shareholder is no longer a company’s main objective. Instead, all stakeholders become part of a company’s business strategy, leading to an objective that goes beyond its optimal profitability. A company’s broader responsibility to society as a whole is at the heart of the debate, as is the search for a more balanced treatment of the different stakeholders and long-term value creation. The continuous integration of ESG factors allows for the creation of a virtuous circle with longer investment horizons and ESG best practices.


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