ESG in the time of Covid-19 crisis!

07 April 2020

Shreya Kaushik*


Financial experts had indicated that globally 2020 would be the tipping point for environmental, social and governance (ESG) factors in businesses especially for financial institutions.[1] BlackRock BLK, the world’s largest asset manager, announced that sustainability would be its “new standard” for investing and urged corporate CEOs to recognize that “climate change has become a defining factor” in their companies’ long-term prospects.[2] In India itself, Axis Mutual Fund launched an ESG fund on 22 January, Quantum Mutual Fund came out with one in July 2019, and SBI Mutual Fund rechristened its equity fund to ESG fund in 2018.

The test for financial institutions and businesses for their focus on ESG came with the Novel Coronavirus Pandemic.

The nation-wide lock down imposed by the Indian Government, though a necessity saw the migrant labourers stranded in big cities with no jobs, no transport to carry them home, or no facility to turn to. The following days saw the state governments providing stay and food shelters for the migrant labourers but the movement back to villages has still not stopped.

Responsibility of Financial Institutions

The management of the situation required health clinics, financial institutions and businesses to communicate better with poor and widely dispersed populations. This communication has to increasingly take place through text messages, audio and video media.

The various schemes announced by the government especially schemes like Pradhan Mantri Garib Kalyan Yojana, relies heavily on financial inclusion. The provisions under financial inclusions rely heavily on the information dissemination through local branch managers, self-help groups, owing to the illiteracy of the marginalised. The mentioned propositions work in normal circumstances however, during this pandemic, the illiteracy of the marginalised communities might further isolate them from the benefits.

The relief measures announced by the government targeting the marginalised communities come with constraints. The availing of the benefits is contingent to the poor having access and/or being eligible to claim benefits as part of already present Central government schemes (Ujjawala Yojana for benefits in kind, Jan Dhan Accounts for transfer, BPL card for rations). The Rs. 500 monthly transfer to women for three months may also not be a sufficient support for households where women are the only earning members. Under MGNREGA too, the rise in wages is contingent to actual MGNREGA work taking place, which might not be the case due to the lockdown.

Given the lack of education amongst the Indian poor and dependency on literates for availing benefits, there are chances that Covid-19 would lead to deepening of inequality. It is therefore essential to equip the informal sector workers and marginalised communities with financial literacy. This is the only way to ensure that the benefits are realised by the marginalised communities and they are not played at the hands of the middlemen.

Responsibility of businesses

The current times are an acid test for businesses and their capacity to work with their employees, governments and supply chains. The ESG focus in the long-term, i.e. prioritising employee benefits, supply chain actors, trade unions, frontline workers, over immediate returns to the shareholder, helps in building investor trust and long-term wealth. In the current times, businesses have the responsibility to act fairly and in setting the pricing and the supply levels of goods and services that can help society respond to the health and/or economic aspects of the crisis. They should work with suppliers, unions, governments, investors and employees to design and implement solutions that avoid externalising further unnecessary harm onto economies and society.

The redirection of the CSR funds to Covid 19 relief measures is a positive step. However, there is a need for building trust amongst the workforce and eventually the investors. The businesses can show their commitments to ESG and long-term sustainable wealth creation in the following way:

  • Companies that would manage the human capital in the current times would peak investor interests in the long run. Immediate and unnecessary laying off despite government support, failure to provide safe working environment across the supply chain, directly harms the human resource and would pose an obstacle in economic recovery of the business and the economy as whole. This would reduce investor interest, as such companies would demonstrate unfair business practices.
  • Addressing the need of the citizens over short-term needs of the shareholders also strengthens the commitment to ESG. Companies switching to production of essential products from existing products such as hand sanitisers, ventilators, medical protective gear, are such good practice examples.
  • Investors have the capacity to nudge businesses towards responsible financial management that allows companies to prioritise employees, contractors, suppliers. This will help in prioritising the health of the company in the long run, rather than short-term focus on executive bonuses, and buy-backs and dividends for shareholders.
  • All these measures coupled with regular communication to the stakeholders and shareholders go a long way in building trust of the stakeholders and beneficiaries.

The failure to act now at the time of crisis, would translate to business losses as both the shareholders and the stakeholders are watching.



*Shreya Kaushik is Project Coordinator, Responsible Finance, Private Sector Engagement, at Oxfam India.

[1] Morningstar Research, February 2020. Sustainable Funds U.S. Landscape Report. 

[2] and

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