Interactive Investor

Four UK blue-chips earn green credentials during the pandemic

14th July 2020 09:48

Jemma Jackson from interactive investor


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The hardship caused by coronavirus has given companies a chance to help out. But some haven’t stepped up.

Just as those who acted positively during the pandemic will be remembered, corporate profiteering from the virus will not be quickly forgotten. People have long memories.

There are a number of stocks that have earned ethical credentials as a result of their philanthropic activities during the Covid-19 pandemic, and then, on the other side of the coin, there is Boohoo (LSE:BOO).

interactive investor, the UK’s second largest direct to consumer platform, comments on both sides of the story.

According to interactive investor, four well-known UK stocks to have earned ethical credentials for initiatives to support global and national efforts to tackle coronavirus include: AstraZeneca (LSE:AZN); Tesco (LSE:TSCO); Vodafone (LSE:VOD) and Unilever (LSE:ULVR).

But it is important to look at the other side of the coin, and remember that the point at which a company’s ethical credentials start to gain traction is hugely subjective – and the story can go the other way, too. Some may recall the Volkswagen emissions scandal in 2015 when a company once seen as ‘ethical’ suddenly had a very different complexion.

Fallen Stars

On Boohoo, Lee Wild, Head of Equity Streategy, interactive investor says: “Allegations of poor staff pay and unsafe working conditions wiped over 40% off Boohoo’s value during a three-day descent, and a subsequent partial recovery proved all too brief. 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. 

“Boohoo shares are much cheaper than they were a few weeks ago, and some investors have seen the sell-off as a buying opportunity based on attractive long-term fundamentals. However, the company is not out of the woods yet, and it is still too far early to know precisely what impact the allegations will have on sales.”

Pandemic Philanthropists?

There are likely to be more stocks to have displayed ethical behaviour during the lockdown period, but the four stocks outlined are deemed to go the extra mile.

This isn’t to say that we now view these stocks as ethical, only that they have exhibited ethical behaviour during the pandemic. 

Richard Hunter, Head of Markets, interactive investor, says: “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 (LSE:TW.).

“On a more practical level, AstraZeneca (LSE:AZN) donated nine million face masks to support healthcare workers around the world; Tesco (LSE:TSCO) has donated in excess of £15 million of food, strengthened its ties with the British Red Cross and provided £1 million funding for local stores to help causes in their neighbourhood; Vodafone (LSE:VOD) gave over 1200 smartphones and tablets to hospitals in Italy and over 30000 SIM cards to hospitals and care centres in Spain; and Unilever (LSE:ULVR) contributed over €100 million through donations of soap, sanitiser, bleach and food, while also making €500 million available of cash flow relief to their most vulnerable small and medium sized suppliers whose business relies on Unilever.

“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.”

Ethical investing is hugely subjective, and many investors may well prefer to invest in funds and investment trusts so that fund managers can make those difficult judgement calls for them.

But this is extremely difficult too, because funds and trusts all have different approaches. 

To make it easier to find suitable ethical investments, interactive investor publishes an ethical investing long list that is broken down into three ii ACE investment styles: Avoids, Considers and Embraces to help steer investors.

We also launched our ethical ACE 30 rated list, the UK’s first, last year, and an interactive investor ethical growth portfolio in January 2020 for investors who want a ready-made, balanced, multi asset portfolio run within a socially responsible investing framework.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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