Spotlight on Social Equity During COVID-19

Dozens of the world's largest companies representing trillions of dollars in market capitalization pledged to use a uniform set of "Stakeholder Capitalism Metrics" in their mainstream disclosures amid broader global efforts to streamline and standardize reporting on environmental, social and governance topics.

The World Economic Forum and its International Business Council made the announcement Jan. 26, as leaders from governments and the private sector worldwide convened for a virtual version of the annual Davos conference.

CEOs from across corporate America spoke out in response to President Donald Trump's refusal to commit to a peaceful transition of power and the subsequent violence on Jan. 6 in Washington, D.C. Last week's events make it clear that expectations of business leaders in times of social unrest are rapidly changing and inaction is less of an option as the environmental, social and governance movement gains traction in the U.S.

After rioters stormed the Capitol building in an attempt to prevent Congress from certifying the Electoral College results, many CEOs issued statements condemning the violence. BlackRock Inc. CEO Larry Fink, head of the world's largest asset manager, called the riots "an assault on our nation, our democracy, and the will of the American people."

This is not the first time in recent memory that the business community has spoken out in response to social unrest. That is in part because the ESG movement is becoming increasingly mainstream. Investors are demanding that companies pay attention to social issues like the racial diversity of their boards, management teams and workforces, and in some cases are submitting shareholder proposals. Employees are increasingly holding companies accountable for their policies on social and political issues, and employers are paying attention.

S&P Global Ratings expects issuance of sustainable debt--including green, social, sustainability, and sustainability-linked bonds--will surpass $700 billion in 2021. This would take cumulative issuance past the $2 trillion milestone, from $1.3 trillion as of year-end 2020. Sustainable debt issuance exceeded $530 billion in 2020, according to Environmental Finance, up a staggering 63% from 2019. Social bonds emerged as the fastest growing segment of the market, growing about 8x in 2020, catapulted by the COVID-19 pandemic and growing concern about social inequities.

As issuer attention shifted toward financing pandemic aid and ensuring recession relief measures, green bond debt slowed in the first half of the 2020. However, it rebounded in the second half, reaching a record annual issuance amount of $270 billion and indicating that issuer and investor appetite for financing climate response and other environmental objectives is strong and accelerating. S&P Global Ratings believes green-labeled bond issuance could exceed $400 billion in 2021, as global political and regulatory actions grow, serving as a catalyst for increased sovereign and private issuance. S&P Global Ratings also believes the green use-of-proceeds model will expand to include transition finance, aiding high-carbon-emitting sectors to finance their transition into net-zero emissions business activities.

Unprecedented fiscal support cushioned the social impact of COVID-19. As this wears off, the question of equitable burden-sharing could determine political agendas in 2021. As the initial “rally-around-the-flag” effects following the outbreak of the pandemic have worn off, long-term trends toward political fragmentation and populism could gain traction.

COVID-19 has become a “great divider”, at least for now. The unequal effect of the pandemic on different socio-economic groups could put perceptions of rising domestic inequalities under heightened political spotlight in 2021. Vulnerable populations, including lower income households, ethnic minorities, but also women, have often been worst affected. The World Bank expects extreme poverty— defined as living on less than US$1.90 day—to have increased in 2020 for the first time in 20 years.

A Wall Street gatekeeper is challenging corporate America to diversify its boardrooms in a proposal that could have profound implications for leadership at thousands of U.S. companies.

In the wake of a racial reckoning in the U.S. sparked by the death of George Floyd, Nasdaq Inc. is wading into the yearslong conversation about diversity in corporate America and the benefits of increasing gender and racial diversity in boardrooms and C-suites.

Stakeholders are increasingly holding companies to a higher social standard, demanding that they demonstrate a real commitment to listening to all stakeholders, nurturing a diverse and inclusive workforce, and engendering strong community relations.

The COVID-19 pandemic has given investors new fuel to push for institutional changes at the world's top pharmaceutical companies to ensure equitable access to medicines in lower income countries.

Lower income nations tend to wait longer to receive access to lifesaving drugs as they emerge from the research and development pipeline, according to the Access to Medicine Foundation's Access to Medicine Index. The companies on the latest edition of the index released Jan. 26 create plans for their medicines early on in the development stage, sometimes years before the drug is ever approved for use in any country.

The index comes after a year in which the pharmaceutical industry suddenly pivoted to tackle the COVID-19 pandemic, with the disease caused by the novel coronavirus becoming one of the biggest R&D focuses for many companies. Pfizer Inc., along with German partner BioNTech SE, have one of the few authorized vaccines for COVID-19. The U.K.'s AstraZeneca PLC has another that is being administered around the world.

In the early days of the new Biden administration, U.S. mine workers may get the additional COVID-19 protections they have sought since March 2020.

After calling on federal officials at the U.S. Mine Safety and Health Administration to issue an emergency temporary standard for workers in the early days of the pandemic, the United Mine Workers of American International Union, or UMWA, later joined with United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union to sue the agency. While the U.S. Court of Appeals for the District of Columbia Circuit sided with MSHA, which said a rule was not necessary, there are indications that the agency will take a different approach under a Biden presidency.

The Trump administration barred all cotton and tomato products from China's Xinjiang region over allegations of human rights abuses against ethnic minorities, spelling potentially large supply chain consequences for U.S. companies that source from the region.

The U.S. Department of Homeland Security on Jan. 13 issued a withhold release order under the authority of Section 307 of the Tariff Act of 1930 against cotton and cotton products and tomatoes sourced from the Xinjiang region in western China. The U.S. imported $9 billion worth of cotton and cotton products from China as a whole in 2020, along with roughly $10 million in tomatoes.