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“Hello. My name is Melody Prenner Bryant and I am one of the portfolio managers of the GAMCO ESG Fund.
In the next few minutes I would like to address the issue of S in ESG. Environmental and governance are familiar topics and receive wide press. “S” – the social factors have had less exposure- but that has changed with recent developments. Social issues are headline news almost every day. The Covid 19 crisis and civil unrest have highlighted the need for corporations to address the social issues – specifically how can a company manage its relationship with its workforce, society at large and the political environment in a sustainable and advantageous way?
Needless to say – the social factors can have important implications for a company’s performance in a variety of ways. Labor productivity, avoiding worker strikes or slowdowns, and worker safety have significant bearing on corporate profitability and its ability to attract and maintain an engaged and efficient workforce. In addition to immediate direct financial consequences there are other less tangible but important reputational effects that have a bearing on a company’s credit rating and its ability to achieve future financial returns.
For example – In the past several months companies that could provide their workers with personal protective equipment and ensure employee safety and welfare proved to be at a competitive advantage. These companies could continue to operate and provide much needed products and services.
Moreover, companies that can manage the social considerations are likely to engender significant loyalty and goodwill with their employees and other stakeholders with positive impacts on their brand. A 2017 study by Optimy indicated that 60% of customers said they were willing to pay more for products from companies with reputable brands and good values, and 71% of millennials said they would choose to work for a company that has demonstrated a strong commitment to its community.
What are the signposts we look for in evaluating a company’s social IQ? Companies should provide answers to questions on topics such as human capital management and preparedness, corporate culture, business resilience, executive compensation and how COVID-19 impacts their ability to perform. Two companies in our portfolio – AT&T and IBM addressed these issues head on. AT&T’s ESG report included information detailing the company’s efforts to assist employees working from home, its philanthropic initiatives and its work for Covid-19 first responders via its wireless network. IBM discussed how they moved 95% of their workforce to working at home within a two-week period because the firm had been investing for a long time in tools to enable remote working. The company maintains an ongoing dialogue with its employees through polls which focus on worker health and productivity.
Heretofore, environmental and governance issues have been in the forefront of investors’ dialogue with corporations. The Covid 19 pandemic and recent protests have placed social policies on equal footing with a greater focus on a companies’ social responsibility including employee health and safety, diversity and inclusion and corporate culture. The portfolio managers of the GAMCO ESG Fund have long been concerned with all three factors – ES &G.
All companies included in the fund rank high versus peers on all three.
Thank you for your time today.”
