Weekly Update, 24th April 2020
Collective and ethical approaches bring a new sense of community, and positive solutions for investors.
Another week of extraordinary news saw a historic crash in the oil price on Monday as traders tried to desperately offload contracts that required them to take delivery of physical oil at the end of May, with nowhere to store it1. The pandemic has seen a huge reduction in the global demand for oil, dropping by over 29 million barrels a day, from 100 million barrels a day2. It appears that any attempt by oil-producing countries to reduce supply and stabilise the price has failed miserably. This is mixed news; the reduction in the use of oil is great for the environment and our health, however we must not forget its centrality to the global economy and everyday life. Oil and its by-products and uses are widespread in modern-day life and our reliance on it is not something that can be given up overnight without repercussions.
In the US the government yet again opened its ‘check’ book, this time with the House passing a package of $484 billion3. At any normal time, this would be an eye watering sum; however this merely followed news of the European Central Bank’s stimulus package of €750 billion which was in addition to a large big-bank stimulus package and the €120 billion of additional asset purchases announced last week. These two central banks are not alone and similar action is being echoed across the world.
Moving to the UK and, unsurprisingly, retail sales have fallen the most on record last month. The closure of many non-essential shops has meant that the volume in retail sales has dropped 5.1%4 in March compared to the previous month. This is the largest fall since the ONS started producing this data in 1996. If it wasn’t for a huge increase of 10.4% in food sales in April compared to the previous month, then these figures would have been considerably worse.
A ray of sunshine can be seen from the East as luxury brands are reporting positive sales returns in April in parts of Asia5. Although not a leading economic indicator, we are seeing green shoots and some economic hope – particularly out of China. As always, we continue to remain positive and patient as more information comes to light.
Despite the lockdown measures requiring physical isolation from others, there have been a number of movements that have called for collective action. Whether it’s clapping for the NHS or joining in Joe Wicks’ morning PE lessons, millions of us have been finding new ways to show solidarity with our neighbours and form online communities.
One such campaign that celebrated a significant birthday this week was Earth Day, an idea first started to raise awareness for environmental protection. The 22nd of April marked the 50th Earth Day of this movement to mobilise people from all over the world to do their bit to reduce their environmental footprint and tread more lightly on the Earth6. In addition, the day marks four years since The Paris Agreement was signed by 170 countries, all of whom agreed to put measures in place to limit global warming to below 2°C7. Today, the average global temperature increase stands at 1.16°C8. This throws into sharp relief the necessity for action on climate change if we are to prevent irreversible damage to our ecosystems. As our update of the 3rd of April discussed9, this action does not need to come at the cost of financial returns. The recent crisis has seen funds that consider Environmental, Social and Governance (ESG) risks as part of their investment process fare better than their conventional counterparts10.
In addition to environmental considerations, the 20th to 26th of April has been heralded as Fashion Revolution Week, commemorating the anniversary of the Rana Plaza factory collapse in Bangladesh on the 24th of April 201311. The Rana Plaza was home to garment workers supplying clothes to many high street names. The building was unsafe and consequently 1,134 people died in the deadliest industrial disaster of modern times12. Outrage in the wake of this tragedy led to a call for greater transparency in fashion supply chains and the signing of an agreement known as the Bangladesh Accord which looked to improve working conditions for those making our clothes13. The tragedy has led to heightened awareness of the need to scrutinise supply chains.
The Fashion Revolution organisation calls for all of us to ask, “Who made my clothes?” to shine a light on those suffering for the rise of fast fashion. The movement has garnered huge support on social media and has served to uncover the true cost of cheap clothes. Holden & Partners take into account this need for transparency when evaluating funds for our portfolios; we ensure that supply chain governance is considered thoroughly within the investment process, so holdings are not exposed to the devastating social risks associated with poor labour conditions. For more information on the ethics of the fashion industry, check out our previous article here.
At Holden & Partners, we consider the risks posed by business activities that jeopardise environmental security and communities when constructing our Ethical, Sustainable and Thematic portfolios. With our shared humanity at the forefront of our minds during these difficult times, we want to provide solutions for investors who wish to meet the needs of the present without compromising the needs of the future.
We are delighted to announce that our efforts in this area have been recognised this week, and Holden & Partners have been shortlisted for Advice Firm of the Year and ESG Adviser of the Year in the Money Marketing Awards 2020. The winners will be announced later in the year and we are keeping our fingers crossed that we’ll come out on top14.
We want to stay in touch with you regularly through this time of great change, and will be aiming for regular weekly updates. Do let us know if you would like to unsubscribe from this list or update your preferences, or alternatively, if there are any topics you would like us to cover.
1 https://www.cbc.ca/news/business/oil-price-monday-1.5538048
6 https://www.earthday.org/about-us/
7 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
9 https://www.holden-partners.co.uk/coronavirus-update-3rd-april-2020/
11 https://www.fashionrevolution.org/about/
12 https://www.ilo.org/global/topics/geip/WCMS_614394/lang–en/index.htm
13 https://bangladeshaccord.org/factories
14 https://moneymarketingawards.co.uk/2020_shortlist
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