Which UK blue chips have emerged as “pandemic philanthropists” and which one stock has disappointed investors with its unethical behaviour? interactive investor takes a look at both sides of the coin.
The consumer platform said although many companies in the UK stepped up their ethical practices during the pandemic, four FTSE 100 stocks stand out from the crowd for initiatives to support global and national efforts to tackle the pandemic.
These are AstraZeneca; Tesco; Vodafone and Unilever, which interactive investor has labelled “pandemic philanthropists”.
Meanwhile, on the flip side, one company in particular has been a huge disappointment to investors as a result of slavery allegations, which wiped some 40% off the stock’s value in just three days. That company is fast fashion brand Boohoo.
Commenting on the latter, interactive investor’s head of equity strategy Lee Wild said: “The allegations are serious and there is real risk of long-lasting reputational damage, which could have a telling impact on the company’s bottom line if proved correct.
“UK authorities did not find evidence of modern slavery during the first round of inspections at the group’s Leicester suppliers, but it has uncovered non-compliance with its code of conduct. It is still early days in the investigation, but this is bad press, and a high-profile ethical fund has already sold its stake in the company, while some professional investors have placed bets that the shares will fall.”
Though some investors have seen the stock price falls as a buying opportunity, the company’s share price remains 27% lower than it started the year, and Wild said it is “not out of the woods yet”.
But picking the ethical winners is just as important as knowing which stocks to avoid, and interactive investor believes the FTSE 100 quartet mentioned above has gone “the extra mile” during the pandemic.
It is well documented that companies’ approach to the social factor in ESG has become more important for investors since the pandemic hit, as the crisis has polarised companies in terms of their ethical behaviour.
Richard Hunter, head of markets, said: “It has already been said that companies will be judged by how they acted during the coronavirus outbreak, and this may partly explain the rise of some pandemic philanthropists. Depending on the sector in which they operate, a number of companies have stepped up to the ESG plate.
“This ranges from the banks delaying loan repayments and overdraft interest in an effort to be seen during this market drop as helping, as opposed to causing the previous financial crisis of 2008/2009. Others have opted to return furlough payments that were not used or required, such as Ikea and Taylor Wimpey.”
The four stand-out stocks were picked by interactive investor for practical ways each one of the companies has contributed to helping the UK and Europe with its pandemic response.
– AstraZeneca donated nine million face masks to support healthcare workers around the world.
– Tesco donated in excess of £15m of food, strengthened its ties with the British Red Cross and provided £1m funding for local stores to help causes in their neighbourhood.
– Vodafone gave over 1200 smartphones and tablets to hospitals in Italy and over 30,000 SIM cards to hospitals and care centres in Spain.
– Unilever contributed over €100m through donations of soap, sanitiser, bleach and food, while also offering €500m worth of cashflow relief to the most vulnerable small and medium-sized business that are reliant on it to survive.
Undoubtedly, each of these moves will help the companies’ ESG credentials. However, these four stocks are clearly not staples in an ESG investment portfolio, and their actions during the pandemic alone do not make them ethical investments overall, interactive investor noted.
Hunter said: “These gestures will be remembered, particularly by the people and general communities who have felt the benefit during difficult economic times. The longer-term effect on the companies’ share prices may be marginal but will nonetheless add to the growing belief that ESG is becoming core to how businesses operate in the future.”