An update from our Global Chief Investment Officer
The global spread of the novel coronavirus, COVID-19, is having a severe impact on how our societies and economies function. Strong leadership and collaborative action is critical in response, and already, governments, central banks and regulators have taken unprecedented action.
In our role as a leading investment manager, we actively encourage stakeholders to consider how they will address the current situation, as outlined below.
- Corporates: Management teams and boards of directors face difficult short-term choices. Decisions should take into account the welfare and safety of employees. For companies under financial stress, we encourage employers to use government support where available to protect employees as much as possible. Companies should consider redundancies or furloughing staff only after exhausting all other options.
We generally support prudent decisions that aim to ensure the long-term success of businesses, which may include, if necessary, suspending dividends, implementing measures to support cashflows and reviewing capital expenditure plans. Financial reporting, investor dialogue and financial responsibility remain essential for investors.
- Governments: Governments should remain focused on the health risks from COVID-19 and follow the advice of healthcare professionals and the World Health Organization. Restrictions should only be lifted on the basis of expert advice.
The crisis should not be used as an opportunity to suppress freedoms, control economic rights or privileges, or to weaken governance standards.
- Financial policymakers and regulators: We encourage continued global efforts to stabilise financial markets with both monetary and fiscal policy in the short term. As markets stabilise, communication with market participants will be crucial as any stabilising initiatives are withdrawn.
We support regulators adapting rules to alleviate short-term pressure related to COVID-19 that may be facing companies and investors – where this is possible without increasing long-term risks. We would also support regulators looking to extend deadlines for all outstanding consultations, and examine whether regulations coming into force in 2020 and 2021 should be delayed.
- Financial counterparties: We encourage regular communication with financial counterparties, based on established risk protocols, with all material developments communicated to senior management, regulators and market participants. This is vital for markets to function effectively.
Insight’s response to the PRI COVID-19 statement
The UN-supported Principles for Responsible Investment (PRI) has introduced seven action points for investors. We list these PRI actions below together with a brief description of Insight’s activity in each area.
- Engage companies that are failing in their crisis management
We encourage our credit analysts to enagage in frequent dialogue with companies, across investment grade, high yield and emerging market debt asset classes. We discuss, where appropriate, action the business is undertaking to protect employees. We report on these company engagements as part of our stewardship process.
- Engage where other harm is being hidden behind, or worsened by, the crisis
Our due diligence process puts analysis and monitoring of environmental, social and governance (ESG) factors at the centre of our approach. We believe that if a company's activity threatens its reputation, it will also impact our clients’ reputations.
- Deprioritise engagement on other topics
We continue to engage on all material topics with issuers. We are not putting on hold our dialogue on ESG factors at this time. We believe companies need to continue their engagement with us on long-term risks.
- Publicly support an economy-wide response
As a leading asset manager, Insight aims to help clients allocate their assets prudently, and to support stable financial markets and investment conditions. We engage with central banks, policymakers and counterparties frequently in this regard.
- Participate in virtual AGMs
We support introducing virtual AGMs and introducing some flexibility around scheduling AGMs. AGMs should not be delayed indefinitely.
- Be receptive to requests for financial support
We endeavour to support businesses that demonstrate strong management of all risk factors. We aim not to expose our clients’ capital to unnecessary business or financial risks.
- Maintain a long-term focus in investment decision making
We continue to focus on long-term risks to investment portfolios, including from ESG factors, as well as governance and business activity.
Looking beyond the crisis
We encourage all stakeholders to continue to review and enhance their ongoing planning, risk management, and oversight programmes in light of these events.
We share a responsibility to support a sustainable economy and play a positive role in society. We believe that this will support investors, including our clients, in achieving their long-term outcomes.
Global Chief Investment Officer