A distributor, a maker of plastic pipes, a fizzy drinks manufacturer, a digital learning provider and a pizza chain have been hailed as some of the unexpected heroes of the coronavirus pandemic.
Analysts at Berenberg sang the praises of a select group of businesses after poring over the response of listed companies to the COVID-19 crisis.
While environmental concerns were the key driver of the significant increase in focus on ESG investing witnessed in 2019, the emphasis changed in the first half of 2020 onto the second letter of the increasingly important investment acronym, which stands for environmental, social and governance.
“The COVID-19 pandemic has brought social considerations to the fore,” said analysts Ned Hammond and Georgina Webb in a note to clients on Friday.
“The measures required to respond effectively to the situation have highlighted the importance of human capital management, with this period providing a stern test for the total stakeholder approach.”
Heroes come in all sizes
Also taking into account the actual financial impact of the pandemic on the company and its responses, the analysts’ London-listed corona-heroes include two from the FTSE 100, Halma PLC (LON:HLMA) and Spirax-Sarco Engineering PLC (LON:SPX), plus three small caps, in the shape of Learning Technologies Group PLC (LON:LTG), Fevertree Drinks PLC (LON:FEVR) and Volution Group PLC (LON:FAN).
AIM-listed Learning Technologies provided free e-learning to retired NHS doctors and nurses that returned to work, while Fevertree was praised for not furloughing any employees and instead using the time to help employees broaden their skills.
Other high points were were seen to be Halma and Spirax, along with Polypipe Group PLC (LON:PLP), repurposed manufacturing to support the production of ventilators, as well as their core businesses supplying key products like PPE or components for medical equipment.
Bodycote PLC (LON:BOY) was also on the list as, despite experiencing a significant impact to earnings from the virus, refocused facilities to support the production of PPE, ventilators and other medical equipment components.
The analysts noted that the company stated specifically that this is part of its ESG responsibility and without a regard to its profitability, “indicating the consideration Bodycote has given to a wide range of stakeholders during the pandemic”, while also repaying the furlough scheme funds it received from the UK government.
Crucial next phase
The coming week will be important in seeing the ESG reaction of some big UK companies and coming months perhaps even more.
With first-half results season building up to a hectic pace next week, “it will be important to consider how companies are dealing with these challenges”.
With Britain and many countries well into the reopening phase of the pandemic, the next few months will bring tough decisions for companies that will affect a range of stakeholders, the Berenberg pair observed, such as whether to maintain employees, when dividends should resume and if additional community support should continue.
“Encouragingly, we have already seen some management maintaining their salary reductions for longer periods, while other companies are repaying funds received from job retention schemes.”
However, dividends remain a touchy subject, with the analysts giving the red X to those few businesses that “slipped up slightly, reinstating dividends while still accessing furlough schemes”.