We begin 2021 conducting a 2020 COVID-19 retrospective. Using our NLP we explore some of the sectors featured prominently in our Safeguard ESG index over the course of 2020: Consumer, Energy & Utilities, Finance & Real Estate, and IT & Communications. In our sector analysis we found the theme of diversity and inclusion woven throughout the year in both positive and negative ways. These findings are explored in detail.
Early in the COVID-19 crisis we introduced a Coronavirus Daily Tracker and dashboard that was designed to help our clients navigate volatile markets. The analytics were built on a model that captures company-specific mentions in news and earnings calls and discerned how COVID-19 influences business fundamentals.
Using our vaccine sentiment analysis, our client Evercore was able to use our data as covered earlier this week to make market predictions and recommendations for investing in the 2021 economic rebound. In this piece we explore some of the sectors featured prominently in our Safeguard ESG index over the course of 2020. Woven throughout the sector analysis is the theme of diversity and inclusion that was deeply felt throughout the year in both positive and negative ways.
Information Technology and Communications services dominated the news in 2020. As the pandemic physically distanced everyone, it required unique solutions to transition working and learning from traditional settings into the home. Microsoft ranked high in this category as they made substantial commitments to a low carbon future and social causes.
While technology may have brought us closer together during the pandemic it was also a divisive tool. Amongst the bottom ranked companies in this sector Google stood out. We covered Google a few weeks ago for diversity and inclusion issues along with antitrust sentiment. Facebook and Twitter also scored poorly in ESG for their role in allowing the dangerous spread of disinformation about COVID-19, the 2020 election, and mounting antitrust sentiment. The rampant spread of disinformation on social media encouraged claims that the 2020 election was fraudulent leading to the latest headlines of protesters storming the Capitol building in Washington. While Tech companies were featured heavily in 2020, it was for all the wrong reasons. Quite a poor showing overall for the sector.
The Consumer space was impacted by the pandemic in a profound way. Discretionary spending went down as tens of millions of people lost their jobs. Social distancing halted travel and dining. The consumer space had high mentions and sentiment throughout the pandemic with a dip in mentions in 4Q. A variety of consumer goods firms made sustainability plans with target goals that were benchmarked. This earned companies high scores on our ESG index like Walmart as well as beverage companies Diageo, Coca-Cola, and Pepsi who we covered earlier this year. Starbucks made diversity and inclusion commitments this year, going as far as tying executive pay to the fulfillment of the obligations they outlined. Amazon became the top corporate purchaser of renewable energy and has led renewable energy projects across the globe.
Collaboration with clean energy development was a hallmark for the consumer space as Tesla and the automobile industry pushed to develop low carbon transportation solutions. Low points for the sector included scandals surrounding Diversity and Inclusion with sexual harassment by restaurant giant McDonald’s and a price fixing scandal by Pilgrim’s Pride chicken among the lowlights.
The top mentioned phrase on our Safeguard ESG Index was “health and safety of our employees” followed by “company’s public statements were materially false”. The dichotomy of how companies say they treat their employees and the reality of their actions became apparent as the pandemic wore on and lawsuits touched major companies for improper working practices amidst COVID-19 outbreaks. Although receiving generally high rankings on our ESG tracker, Amazon and Tyson both were involved with allegations and lawsuits for unsafe working conditions.
2020 was an important year in the development of a low carbon economy. An upcoming Biden administration is friendly to alternative energy, and prices on solar and wind have become cheaper and more affordable. As we noted earlier, many companies across industries pledged to lower emissions and collaborate to invest and develop clean energy. Energy giants in Europe like BP and Equinor diversified their holdings by investing in wind and solar power. Furthermore, hydrogen activity became more prominent between Q2 and Q3 as development of alternative energy took center stage at the end of the year.
The finance sector had a year marked by success and some scandal thrown in as well. Bank of America and CitiGroup made positive headlines in our September article. Bank of America made financial commitments to the tune of $1 billion towards building a more equitable economy. CitiGroup made waves with the announcement that Jane Fraser would head the firm and become the first female leader of a major Wall Street bank. On the flip side the industry was also marred by a laundering scandal that implicated Deutsche Bank and J.P. Morgan. The main takeaway for the industry was the positive way banks positioned themselves towards Diversity and Inclusion investments in order to create a more equitable economy.
While 2020 was a year marked by tragedy and unbearable loss of human life there were a few reasons to be hopeful for the new year. Companies are taking heed of ESG issues in a way that fits larger strategic goals and lays out science based targets to benchmark their goals. Collaboration between the Consumer space and Energy sectors to create a low carbon economy has started to show results. Shareholder activism is increasingly holding companies responsible for their actions around labor and equality issues. A new political administration will look to support those deemed essential workers during the pandemic by providing better wages and benefits. Above all true heroism has been shown by healthcare workers around the world who put their lives on the line every day to serve and protect their fellow human beings. With increased vaccination efforts we can be hopeful that the pandemic will subside in 2021 and lead to a brighter, more equitable future.
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Amenity Analytics is the industry leader in providing insights from unstructured text by using Natural Language Processing (NLP) assisted by Artificial Intelligence (AI) and Machine Learning (ML). Amenity’s NLP system is a sector-agnostic, language-dependent tool for quantitative text analysis that is deployed across the financial services industry and beyond.
This communication does not represent investment advice. Transcript text provided by FACTSET and S&P Global Market Intelligence.
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