With the COVID-19 pandemic continuing to wreak havoc across the globe, investors are still wondering (and debating) how best to respond to this crisis. For investors who are committed to socially responsible investing (SRI), it’s never been more important to act promptly—by doing so, investors can help reduce many of the most harmful economic and health-related aspects of this pandemic. Learn more about three steps socially-responsible investors can take to make their portfolios more responsive to COVID-19 concerns.
Accept the Likelihood of (Temporarily) Lower Returns
During any global financial crisis, fund managers can face the double-edged sword of declining revenue and liquidity-crushing outflows. Over the long term, even the fluctuations created by an unprecedented event like the COVID-19 pandemic can look like a blip in the rear-view mirror. But fund managers who are under investor pressure to maintain positive short-term returns may make decisions that cripple the business’s long-term growth opportunities.
For example, if a business under pressure takes on high-interest debt instead of cutting expenses (including dividends), making the payments on this debt can limit the business’s future flexibility to invest in cost-saving upgrades and improvements.
By making clear that you’ll place your support behind companies making sustainable business decisions during this pandemic, investors can help boost the likelihood of healthier long-term results.
Ask the Important Supply-Chain Questions
One part of supporting companies that make responsible long-term decisions includes assessing how a particular company has adapted its supply chain processes to protect employees and suppliers.
Companies that have taken a “customer is always right” approach at the expense of their employees’ health and safety—or worse, companies that have attempted to squeeze extra profit out of high-demand items or services—shouldn’t be rewarded for this bad behavior.
During this crisis, assess how the companies you invest in treat those on who they depend. Are they acting responsibly in setting prices and supply levels? Are they treating their employees with respect and flexibility? Are they placing profits over human lives? If the answer to any of these questions is no, consider whether your commitment to socially-responsible investing requires you to sever ties.
Speak Up in Support
Though pundits may decry the idea of “cancel culture,” the power of viral public backlash can be incredibly effective when it comes to spotlighting bad corporate governance. If you’d like to shine a light on poor practices to help spur change, speak up at annual general meetings (AGMs). Talk to your elected officials about increasing penalties for things like price gouging or Occupational Safety and Health Administration (OSHA) violations.
By using your power to speak on behalf of those without, you’ll help embody the principles of socially-responsible investing to create a more sustainable social and economic framework for future investors.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Please keep in mind, the return on values based investments may be lower than if you make decisions based solely on investment considerations.
LPL Tracking 01-05009879