Coronavirus ESG Monitor: How dislocated is the economy?

Blog June 11, 2020

Each week, Truvalue Labs provides an overview of the key trends and patterns from our Coronavirus ESG Monitor and dataset. Here’s what’s new:

How dislocated is the economy?

Many market participants have been confused by the diverging signals between the real economy and the equity market, seemingly defying theory, intuition, and logic. There are three reasons, however, that help explain this apparent cognitive dissonance:

  1. The market does not properly price social and environmental impacts of business.
    On the environmental side, this is a known problem, triggered by the lack of natural capital pricing and effective scarcity signals, as well as tragedy of the commons and public goods issues. On the social side, wage suppression at the low end of the ‘human capital’ spectrum continues to result in a concept we coin ‘over-earning’, transferring value to asset owners while continually exacerbating structural economic inequality.
  2. This too shall pass.
    As evidenced by the declining COVID-19-related information volume captured by Truvalue Labs, attention is drifting away from issues unique to the pandemic. Investors, too, are looking past near term financial dislocations and focusing on intrinsic value (for example, see Nikola’s valuation on no revenue) with comfort that the Fed and Central Banks will provide continuous support (with more fiscal stimulus a bonus).
  3. Corporate Resilience
    Many firms have been exceptionally creative in their ability to survive through this shock. As we discuss in our Research Brief highlighting Top Responders, companies across a wide swath of industries have repurposed operations to meet the moment. Meanwhile, the global pandemic has also accelerated certain behavioral trends that serve as a tailwind to some businesses.

The decline in COVID-19 volume captured by Truvalue Labs has correlated closely with the rise in US equity prices. 

COVID-19 volume has correlated with the rise of the S&P 500 | Coronavirus ESG Monitor | Truvalue Labs

Will corporates change posture on racial equality permanently?

Last week we focused on the role of corporations, or put differently the collective actions by those employed by the same firm, in advancing racial equality. This week and going forward, we will follow up and track actions by companies that trigger outsized stakeholder attention, detected algorithmically by Truvalue Labs Spotlight Events. 

Here we highlight Spotlight Events capturing noteworthy actions taken by companies with respect to racial equality. Across our system, two of SASB’s categories—Employee Engagement, Diversity & Inclusion and Human Rights and Community Relations—are capturing firm investments in social progress.

Racial Equality-related Spotlight Events | Coronavirus ESG Monitor | Truvalue Labs

 

We will continue to add highlights of the data trends within our Coronavirus ESG Monitor.  We will also send out a weekly Coronavirus ESG update featuring key insights and noteworthy trends. Subscribe here.