The social element of ESG is being closely watched by wealthy investors in the wake of Covid-19 and the social justice movement—specifically how companies treat their employees and respond to political issues. according to a recent survey by Crossmark Global Investments.
More than half (59%) of investors indicated that their decision to invest in a company would be impacted if that company made significant layoffs due to the pandemic while the management team did not take pay cuts, according to the nationwide survey of 1,269 investors with investable assets of at least $250,000.
Most investors (56%) also said they are paying more attention to how companies treat their employees this year. They place a high level of importance on corporate actions taken relating to sexist and racist remarks made by a company's employees, according to the survey.
Millennials (ages 18 to 34) are more likely to push for termination for racist (61%) or sexist (55%) comments from employees. Among baby boomers, (ages 55-plus), 38% said a person should be terminated for making a racist (38%) or sexist (32%) comment. The survey also found that women across all age groups (47%) are more intolerable of such behaviors and would be less likely to invest in a company that did not terminate an employee for those actions.
“The events of this year have shed a new light on how companies treat employees and handle certain situations. Investors are paying more attention to the ethical standards of a company when making an investment decision,” said Michael Kern, president and CEO of Crossmark.
Investors also are taking note of how companies respond to political issues. The survey found that three-quarters of investors indicated that a company's response to political issues plays a large role in whether they will invest in the company. Seventy-nine percent of boomers said they are more likely to let a company's response to political issues impact their decision to invest in the company, and 69% of millennial felt the same way.
Millennials (60%) are also more inclined to pay attention when it comes to investing in a company based on its philanthropic efforts. Forty-three percent of baby boomers said they are impacted by a company’s philanthropic efforts. Furthermore, 62% of millennials said philanthropic efforts by a company have an impact on their decisions when purchasing products or services.
Most respondents said they either reviewed companies' websites (38%) or looked for news coverage of companies' diversity efforts (32%).
The survey found that younger investors were the most optimistic about the performance of ESG, with 42% of millennial investors believing ESG outperforms in a down market, compared to 9% of baby boomers.
While only 16% of female respondents in the 55-plus age group believe ESG does not outperform in a down market, nearly half (46%) of male respondents agreed.