April 17, 2020

When you’ve been locked down for several weeks, it’s natural and understandable to wax nostalgic about life before COVID-19. In times of crisis, the desire to return to the past is powerful – especially when the future is so uncertain.

NEI Blog April 17

We simply don’t know how – or when – the COVID-19 crisis will pass, what the world will look like, what working life will resemble or how companies will operate. The easiest answer is to hope for a return to the comfort and familiarity – flaws and all – of where we were. But we see a sustainably-focused business culture as key to unlocking post COVID-19 opportunity.

The cold truth is we can’t go back to the way things were. Even at the best of the times, you can’t make the past work. We can only move forward.

At NEI, we get this implicitly. We’re wired to look to the future, and to help create what we believe is a better future – both for the companies we hold, and the people who invest in our funds. Being future-focused is built into our culture, and it should be: the future is what investing is about.

So that’s how we look at the COVID-19 crisis. We see the devastation – in personal terms, to our health care system, and to our economy – that the virus is causing. But we’re also looking beyond the crisis to what we believe is an unparalleled opportunity to create positive change.

What if the commendable actions we’re seeing from companies to look out for the interests of their employees, customers and communities – not just shareholders – during this crisis, became the norm?
What if companies in the energy sector used public funding to develop green energy infrastructure?
What if the management of corporations committed, in the wake of trillions of dollars of bailout money, to consistently pay their fair share of taxes?
You can’t just flick a switch to start thinking this way. For most companies, it requires a cultural shift. It takes time. And it takes understanding and accepting that the way forward is not the way back.

That’s why, in our corporate engagement work, establishing a forward-looking culture in the companies we partner with is just as important as the ESG issues we’re talking to them about. The many successes we’ve had in advancing an ESG-focused corporate agenda with energy leader Suncor, for example, are directly attributable to the forward-looking culture the company has developed over the years working with us. Had the leaders of Suncor not accepted the importance of transitioning the company’s operations to align with a low carbon future, then Suncor would have never achieved the litany of ESG-related ‘firsts’ in this sector – an impressive list of accomplishments for other firms to follow.

None of this could have happened if we hadn’t had conversations with companies in the first place; and if we hadn’t worked just as hard on establishing with them a sustainability-focused culture, as we did on improving their performance on ESG factors.

“Culture eats strategy for breakfast” is a famous quote attributed to legendary management consultant Peter Drucker. We agree. But we think of it in slightly different terms: a forward-looking culture will keep you and all your stakeholders well fed for the whole day.