COVID-19: Reshaping the notion of the materiality of health and ESG investing

The COVID-19 pandemic’s economic impact has placed a spotlight on the links between population health and the economy. Once considered the invisible H in environmental, social, and governance (ESG) reporting, health now is the pivotal piece that underpins all of ESG, and it will play a key role in how companies and shareholders assess where to invest in the years to come. From where we stand, the future of investing is investing in health. 

Just a few years ago, ESG investing—was on the fringe, considered a less traditional way of directing investment dollars. That’s no longer the case, according to Mona Naqvi, Senior Director of ESG, S&P Dow Jones Indices in a recent Investing for Health webcast.

“What’s changed in the last five years is the level of interest from the mainstream community in health investments—there’s more data, disclosure, information and insights than ever before. For the first time we have the ability to integrate ESG information with traditional investor analysis in a way that allows us to expand our risk management toolkit,” Naqvi says, “making ESG much more accessible.”

As ESG investing has seen a rise in popularity, the COVID-19 pandemic has further crystallized the way business and health are connected, notes Amit Bouri, CEO of the Global Impact Investment Network (GIIN).

“We’re already seeing a much stronger intentionality as we think about how we’re going to recover from this crisis,” Bouri says. “We’re asking, ‘How do we build back better?’ And in doing so, how do we think about a more integrated way of investing to provide better healthcare and, more importantly, better health across the board. Investors will play a critical role in driving that future.”

In the past, some professionals incorrectly equated ESG investing with a tradeoff for traditional returns—sacrificing profits for sustainable investment choices. That’s simply not the case, says Alison Omens, Chief Strategy Officer of JUST Capital.

“We’re consistently seeing—and there’s early evidence—that companies that are performing well on ESG frameworks tend to be outperforming their peers. Through a recent assessment, we found that companies that have performed well on JUST Capital’s worker/stakeholder assessment are outperforming companies in the lowest quintile by 7.3%.”

Investing with a focus for health and well-being isn’t just a boon for workers and corporate stakeholders, it benefits a business’s bottom line. Companies that prioritized health in past financial crises saw lower employee burnout, increased productivity, and higher job satisfaction that allowed them to successfully weather the storm.

“We’ve been tracking corporate performance on COVID-related issues: Have companies announced new or more flexible paid sick leave policies? Have they created financial assistance in some way? Have they created an emergency relief fund? Are they extending or being flexible on hours? There’s a body of evidence from the 2008 recession that suggests that companies who were good on shareholder issues and good on operational issues tended to perform better than their peers and survive than those that didn’t,” Omens says. 

“Companies are being put under the microscope like never before regarding public health issues and the way they treat their employees,” Naqvi says. “This crisis has demonstrated the materiality of public health.” 

As the future of health and investing unfolds, the International WELL Building Institute (IWBI) is committed to supporting the development of spaces and workplaces focused on human wellness and safety. The WELL Building Standard—a free resource from IWBI—can help guide businesses, corporations, and organizations in implementing the strategies necessary to promote health and wellness within their institutions.

This article was written by Jason Hartke, Ph.D., Executive Vice President, Advocacy and Policy at the International WELL Building Institute (IWBI).