Monitoring ESG risks through the pandemic

During Covid-19, Zurich-based Mette Kjaer spends her time assessing portfolio companies’ environmental, social and governance risks, ensuring our portfolio keeps adhering to the agreed standards.

With travel being suspended an no on-site ESG checks taking place, how do you keep yourself busy during Covid-19?

We usually visit our portfolio companies to check whether all our ESG requirements are met. With Covid-19, these on-site visits have been suspended. At the same time, the off-site monitoring activities continue and are even enhanced: With the challenges Covid-19 present, our investment officers heavily rely on the ESG team’s expertise, especially when it comes to the “S” factor (social), i.e. labour aspects.

What is your particular focus during Covid-19?

Our task is to manage environmental, social and governance risks for our portfolio. With Covid-19, the main focus is to ensure that portfolio companies are equipped to remain operative and/or take up their operations once again as quickly as possible. Managing their workforce is obviously a very important aspect of this. If companies can retain skilled employees, they will be able to resume operations more quickly once the situation allows it. This is why being a good employer ultimately benefits companies as well as staff, especially in times of crisis.

"If companies can retain skilled employees, they will be able to resume operations more quickly once the situation allows it."

Mette Kjaer

How do you support portfolio companies in this area?

Our main focus is to monitor the performance on social and labour issues at investee level during and after the Covid-19 crisis. While we can’t avoid retrenchment, we can monitor and check that it is correctly managed to minimize the negative impact for workers. To do this, we help portfolio companies by providing guidance on how to manage this challenging situation. Various organizations and development finance institutions including IFC, CDC and EBRD have provided guidelines on how impact investors can help portfolio companies get through this crisis in the best possible way, and we base our own procedures on these standards. We are also helping our investees by identifying national support schemes wherever they are available or support them in creating short-time alternatives such as programmes for reduced working hours – a practice widely used in Europe during the pandemic – or rotating staff to where they can remain operative at least in part.

Has dealing with Covid-19 provided new insight in the area of ESG risk management?

This crisis has shown us that it pays off to be prepared. Our stringent ESG requirements have meant that all of the companies in our portfolio either have good labour policies and practices in place or are in the process of improving them, which makes them more resilient in the current crisis and can create the right framework for an adequate labour-related response to the pandemic. The increased challenges caused by Covid-19 show that the work we do on a daily basis – assessing and helping companies to perform better on ESG-related matters – does make a difference for companies in emerging markets and their staff. This is why we continue to develop and improve responsAbility’s ESG framework, both for existing and new funds. This includes preparation for the upcoming EU regulation on sustainable finance, which will be highly relevant for our climate-related investments, in particular.