Covid-19 Affecting ESG Scores

ESG investment scores, which derive from the environmental, social and governance standards that socially conscious investors use to screen potential investments, are being impacted by the Covid-19 pandemic.  According to a recent Bloomberg report, the pandemic is “awakening fund managers who consider [ESG] issues when investing to blind spots in their analysis of companies.”  The report explains how “the spreading pandemic is prompting investors to put a greater emphasis on the “S” of ESG and consider how companies treat employees during the pandemic.”  As such, the virus has complicated efforts to objectively calculate a score for this metric, which, even in normal times, is difficult to quantify.  This exemplifies a key problem with ESG funds, that “[t]he collection of issues that gets dropped into the ESG bucket is diverse, but many of them simply cannot be reduced to a single, standardizable score.”