Comment: The moral imperative for business in the face of covid-19

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Leon Kamhi of Federated Hermes
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Leon Kamhi of Federated Hermes

The requirement for business to be a positive force in society is core to acting as a responsible investment manager and steward, says Leon Kamhi.

The fundamentals of the investment management industry, of analysis, valuation, portfolio construction, engagement and stewardship, need to combine to deliver this.  

As a firm, we have always seen societal aims as being fundamental to the purpose and delivery of sustainable wealth creation for the benefit of investors.

Companies' action on climate change, accelerated technological transition and other systemic risks will be measured by their efforts to ensure that there is an associated just transition for all stakeholders in society."

While we have been careful not to represent this mission as an ethical or moral endeavour, if we are honest, we could never strip out the moral dimension and, in the context of the current covid-19 crisis that is all the more true.

A month ago, my mother became an early victim of this vicious and resourceful virus. Since then, in the compassionately ordained intensive mourning requirements of Judaic practice, I have had time to develop my thoughts on the moral lessons of the current crisis for humankind, and for business in particular.

Like beauty, morality is in the eye of the beholder and so what follows is a personal perspective.

My first observation is that we all need a social licence to operate. In the early days of the virus, the probability of risk to the individual was infinitesimally small.

However, continuing to go about our business, as we all did, increased the risk to society as a whole and therefore the individuals within it, making it a near certainty.

No person or business is an island. Each must consider what its impact on society is and collaborate to achieve a society which works for all constituents. Businesses will be stronger for it.

Secondly, it is evidently clear that health-wise, the virus does not discriminate by nationality, religion, wealth, colour, sex, sexuality or indeed someone's moral behaviour.

Its predominant victims are, however, the most vulnerable, with our aged and those with specific medical conditions impacted the hardest.

With some notable exceptions, the outpouring of concern for the sanctity of life for those often ignored - independent of background - over severe economic considerations has been inspiring.

Businesses must continue efforts to include all streams of society in its workforce and activities, safeguard them economically through the crisis and always act in the interests of pension scheme members, who provide companies with much of their capital.

Third, is the care we provide to colleagues, customers and everyone else in society we interact with.

While in isolation, distancing and hygiene strictures brought in to mitigate the impact of the virus prevent us from being in close proximity to one another.

Just as this has implications for how we love those closest to us, it also has implications for our workforce and customers.

While I recognise this may not be true everywhere, the businesses I interact with have responded brilliantly with all sorts of communication initiatives, mental health support and reinforcement of job security.

There has been increased recognition of the humanity of people we interact with. All too often, individuals are commoditised as we get on with our everyday business.

Fourth, is the way the crisis has encouraged us to act and change our behaviours to respond to a rapidly changing environment.

While finally acting, many western governments seemed to have sleepwalked into what became drastic actions, despite the obvious warning signs coming from China and Italy.

Businesses and individuals, in turn, have typically followed their governments' leads.

Finally, a fundamental lesson of this crisis is that however hard it is and whatever the peer pressure and lack of leadership, we need to do the right thing. This can be achieved with the right intent, attitude and leadership.

The climate emergency, while a slower burn than Covid-19, is nonetheless upon us right here and right now.

Despite all the words, governments, businesses and consumers are failing to act with sufficient purpose and radical action.

This needs to change now by finding the same level of intent to deal with climate change as we are doing with the pandemic.

Every support
I genuinely believe that businesses will be judged by how they respond to this crisis in looking after all their stakeholders.

Every support must be given by businesses to safeguard the jobs and compensation of their employees as well as their wellbeing and where businesses genuinely can't, governments must come in as they have started to, to protect business from running out of cash.

Suppliers, as I have seen in specific cases, should not be pressurised to provide non-essential goods if this creates a risk to their employees or society more generally.

The greatest test for business, however, will be after the pandemic is over - be that in six or 18-months' time.

The scale of the current crisis will change both the way investors engage with companies and the prism through which they judge the expected behaviours of leadership teams towards all their stakeholders including broader society.

The pervasive impacts of coronavirus have shocked today's society into a sudden and stark realisation of what a global challenge really feels like.

As a result, continued inaction on other global challenges will now be judged in a new context. For years, companies have failed to act on climate change because many have not felt the direct effects.

Significant technology disruptions are also set to continue across industries, bringing potentially huge ramifications for the level and quality of jobs and the way we serve our customers.

Going forward, companies' action on climate change, accelerated technological transition and other systemic risks will be measured by their efforts to ensure that there is an associated just transition for all stakeholders in society.

It is up to us whether we learn the lessons from this tiny, invisible organism which has completely upended our economy and the way we live. With humility and resolve, I believe that collectively we can.

Leon Kamhi is head of responsibility, international business at Federated Hermes. This article was first published by Investment Week