ILA Directors’ Day 2020: Report

The primacy of shareholder value as an overriding corporate priority – propounded by Milton Friedman in 1970 – has led to increased inequality, the erosion of community and environmental degradation, governance expert Jaap Winter told participants at ILA’s – virtual – Directors’ Day event last month. But the wind has changed: the Covid-19 pandemic has contributed to a shift in mindset as companies adopt goals such as environmental and climate protection, as well as embracing social responsibility into their activities and supply chains. ILA members heard how these trends are dovetailing with the digital revolution, the rise of sustainable finance and flexibility in the workplace – and the home office – in a moment of unprecedented change for companies and their boards. Here’s a report we put together as media partners for ILA‘s event.

Governance and society: From the decline of shareholder primacy to living with Covid-19

The past year has changed much in the business world, from working patterns and relationships with technology to the steady emergence of sustainability as an existential issue for companies.

The ILA Directors’ Day on November 23 encompassed many of these trends, itself transformed into an online event, as with so many others in 2020. But in many respects, participants heard, Covid-19 has lent impetus, urgency and visibility to current trends rather than overthrowing the existing order.

Take social responsibility, long overlooked as a significant corporate imperative. In 2020, it  emerged as a major boardroom concern as the ‘S’ in ESG, an acronym spreading faster than ever from ethical investment niches to the economic mainstream.

Not coincidentally, its new prominence coincides with an apparently terminal crisis for the dominant paradigm of Western capitalism for the past half-century – maximising shareholder value – according to academic and corporate governance expert Jaap Winter.

“Shareholder value, as propounded by Milton Friedman in 1970, became no longer an outcome of business processes but corporations’ sole objective,” he said. “It led to remuneration based on targets for revenue and profitability, focused on the short term to enable managers to qualify for bonuses and exercise stock options. Everything on corporate balance sheets becomes transactional assets with a price; costs paid by staff, communities, the environment and climate are externalities that are not the company’s responsibility.”

Long-term focus

This, Winter argues, has led inexorably to increased inequality, the erosion of community and environmental degradation.

But even before the pandemic, a change of heart was underway, exemplified by the adoption in August 2019 of a new standard of corporate responsibility by the US Business Roundtable to supersede shareholder primacy, embracing the principles of delivering value to customers, investing in employees, dealing fairly with suppliers, supporting local communities and the environment, and focusing on the long term in generating value for shareholders.

Already, many companies, especially in Europe, have incorporated the United Nations’ Sustainable Development Goals into their strategies, Winter says, but the process of realigning corporate aims with the wider needs of society has taken a step forward with Covid-19. Suddenly the state is no longer a brake on business success and profit but the source of funding that has kept companies alive.

At the same time, companies have embraced goals that benefit society rather than simply boost the bottom line, turning their factories to manufacturing respirators or protective equipment and laboratories to vaccine development.

Winter argues that the challenges of 2020 have reawakened the best and most useful corporate attributes, which had been curbed by the short-term focus on shareholder value: the kind of risk-taking, creativity and energy (rewarded by profit) that governments struggle to deliver on their own: “Business was needed to resolve the crisis – to solve problems rather than create them.”

Higher standards

He acknowledges that the idea of serving a broader array of stakeholders has its critics, who complain it confuses companies about their goals and risks cutting them off from shareholders, their source of funding. And he acknowledges that well-meaning measures such as elements of the Dutch corporate governance code have been used to ward off unwelcome bidders rather than pursue long-term value creation.

Winter applauds initiatives such as public benefit corporations, corporate purpose provisions in France’s Loi PACTE, and B Corporation certification for businesses that meet the highest standards of socialand environmental performance, public transparency and legal accountability to balance profit and purpose.

“I believe there should be general base standards of social responsibility for all, plus legal forms for those that want to go further,” he said.

The Netherlands is proposing that the duties of corporate officers should be extended to ensuring that companies act as responsible corporate citizens. Yet that and similar approaches raise questions about how this interacts with the power of shareholders’ meetings to pass resolutions, individual liability, and the design of remuneration to provide incentives to meet these goals.

“There is a need to reintegrate business and society, which have been separated by the fully-fledged shareholder primacy obligation,” Winter said. But he cautioned: “The financial industry still has a problem with indifference on the part of some institutional investors that remain focused on returns and liquidity, which diminishes their ESG impact.”

ILA’s Carine Feipel and John Li discuss governance hot topics for financial sector

Technology and governance

Another disruptive trend in corporate organisation and strategy that has been accelerated by the pandemic: the integration of digital innovation into almost every aspect of companies’ activities.

Martha Crawford, dean of the Jack Welch College of Business & Technology at Sacred Heart University in Fairfield, Connecticut, says that in the industrial field, digitalisation is a logical part of process improvement, leading to less waste and more profit.

However, it goes much further, she argues: making existing products smarter and more compelling, using data itself as a product or service, and developing completely new products and services, for example through mass customisation.

“When things undergo digital transformation, they take on the properties predicted by Moore’s Law [originally formulated to describe the inverse relationship over time of computing power and its cost],” she said. “This has consequences, including the emergence of alternative business models, the redefinition of customer relationships and experience and the convergence of business verticals.”

These trends raise new challenges regarding corporate responsibility, Crawford says, and how companies deal with risk. She notes from personal experience that executives and directors are prone to overestimate short-term business risks while underplaying technology risks, such as data leaks and ransomware attacks – until their company becomes a victim.

“Before we were attacked, it was hard to get the attention of the audit committee, which was mainly focused on financial issues,” she said. “But afterwards, we implemented a three-year cyber-security plan in three months.”

Should it be mandatory for companies to have digital expertise on the board? It’s a good idea, Crawford advises.

But she says that in time, all business leaders will need to have much more digital knowledge than their counterparts did in the 20th century – “and when millennials reach the C-suite, that knowledge will be very much greater.”

Sustainable finance opportunity

Boards also must grapple with sustainability issues that in Europe, at least, are increasingly being enforced by legislative requirements – for instance, investment funds have until March 10 next year to comply with the EU’s Sustainable Finance Disclosure Regulation.

However, since the European Commission has fallen behind on setting out in detail how financial institutions should report on the sustainability risks of investment products, they can only follow the legislation’s high-level principles, with the requirement that disclosures should be clear, concise and not misleading.

Green or sustainable fund labels such as those awarded by Luxembourg’s LuxFLAG can help, argues fund director Jane Wilkinson. “The key questions for directors are what the asset manager’s overall strategy is, how it should embrace sustainability issues and how this should be rolled out to individual funds.”

But PwC Luxembourg partner Nathalie Dogniez noted: “We can capitalise on Europe’s advance over the rest of the world. It is an opportunity for asset managers with sustainability credentials in other markets.”

Covid-19’s long-term impact

The Covid-19 pandemic has demonstrated that companies and their boards can be adaptable, adopting different processes and models, such as working offsite.

From left to right: Karen Wauters, Luc Frieden, Monique Bachner

But Chamber of Commerce chairman and former finance minister Luc Frieden says companies are still in the process of learning the lessons. “Reprioritisation is important in every crisis,” he said. “Bringing people together, even if they can’t meet physically, has become vital.”

However, he says making a success of remote board meetings is more complex than it might at first appear: “From a technological point of view, the equipment and infrastructure worked so the content of meeting was good. A screen community works if you already know people, but we miss the informal gatherings before and after meetings.”

Frieden says he would retain some of the new habits and practices, such as taking decisions by circular and e-mail, in the post-pandemic world.

But many of the consequences will be here for a long time, he warns. “Luxembourg’s steel crisis took 10 years to resolve; the global financial crisis needed five years. Even if the disease is under control soon, it will take four or five years before things are back to normal; repeated lockdowns and supply chain disruption will have an ongoing economic and psychological impact.

“In the medium and long term, companies may need to find new markets and use different tools. For now, many people are stressed and focused on the immediate future, but boards need to focus on planning for changes over the next five years.”

Covid-19 Misinformation: How Donald Trump Has Made Lying The New Normal

Coronavirus lies and covid-19 misinformation being spread as a long nose metaphor with 3D illustration elements.

We are living a global pandemic of massive proportions that has disrupted our politics, societies and economies, threatening our lives every day and throwing the future of the planet into ever-more-serious doubt. I’m not talking about Covid-19, although that pandemic has been instrumental in highlighting the threat we face from this one: an “infodemic” of covid misinformation.

And, according to a new study, one source has been involved in pushing or spreading an astonishing 38% of the misinformation circulating about the disease.

Have you guessed by now what – or who – that is?

Yes, President Donald J. Trump, the single most powerful voice on the planet, the man whose every word, tweet and appearance has the potential to move markets, break or make careers and most frightening of all, determine public policy.

Cornell University’s study represents the first comprehensive survey of traditional and digital media about the Covid-19 pandemic. The researchers’ results are based on a search and subsequent analysis of 38 million English-language stories published in traditional media around the world from January 1 to May 26, 2020.

No expert would argue with them that “misinformation about COVID-19 is a serious threat to global public health.”

“We conclude that the President of the United States was likely the largest driver of the COVID-19 misinformation ‘infodemic,'” they found in examining the 1,116,952 stories with Covid misinformation.

“Only 16.4% of the misinformation conversation was ‘fact- checking’ in nature, suggesting that the majority of COVID misinformation is conveyed by the media without question or correction.”

(The lapses by mainstream media in fact-checking and correcting that coronavirus misinformation is a subject for another day. That’s just one reason my co-founder, an ex President of Thomson Reuters, and I created VitalBriefing: to ensure that our clients could get reliable and trustworthy information that adhere to longstanding journalistic standards.)

The shape of Covid misinformation

Infographic Donald Trump's coronavirus lies and misinformation

They organized the misinformation into 11 categories in order of frequency:

  • Miracle cures
  • New World Order/Deep State
  • Democratic Party Hoax
  • Wuhan Lab/Bioweapen
  • Bill Gates
  • 5G
  • Antisemitic Conspiracies
  • Population Control
  • Dr. Anthony Fauci
  • Plandemic
  • Bat Soup

And if any doubt remains about the mortal implications of this problem, consider this: According to the Cornell researchers, in prior pandemics, including HIV/AIDS, the cost of misinformation and its impact on public policy was estimated to be an additional 300,000 deaths in just one country alone — South Africa. 

Given that the ultimate cost of pandemic misinformation is death, dwell for a moment on that thought: The single factor most responsible for misinformation in the current pandemic is the president of the United States.

Naïveté is not among my many faults. As a journalist and foreign correspondent, I’ve covered lying politicians and officials at the local, state, national and international levels.

American presidents have lied or misinformed countless times — Lyndon Johnson on Vietnam, Richard Nixon on Watergate, Bill Clinton about Monica Lewinsky, George W. Bush about Iraq, to name a few — but I never would have envisioned the current degree of open and repeated mendacity on the part of the country’s leader.

It is especially notable that while misinformation and conspiracy theories promulgated by ostensibly grassroots sources, such as anti- vaccination groups, 5G opponents, and political extremists, do appear in our analysis in several of the topics, they contributed far less to the overall volume of misinformation than more powerful actors, in particular the US President.

The Cornell Alliance for Science, Department of Global Development, Cornell UniversitY

A lifetime of lying

Trump built his entire career on lies — an aspect of his personality that’s been well documented. His presidency started in character, with his insistence that his inauguration drew record crowds. As of July, according to The Washington Post, the president had made more than 20,000 false or misleading claims — an average of 23 every day — since taking office in January 2017.

And we know there have been many, many more since then.

It’s a short walk from “alternative facts” to outright lying. Clearly, in his flouting of medical advice about mask-wearing and social distancing — despite the efforts of various American doctors to address Covid misinformation, including most notably Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases — Trump believed the web of falsehoods he has been spinning throughout the pandemic.

It’s all in keeping with “a regime rotten with mendacity,” as New York Times columnist Michelle Goldberg wrote this week, following on the paper’s reporting of how the White House culture as set by the president placed multitudes of staff and visitors at risk — and resulting in the infection of Trump, his wife, and multiple members of the administration. 

The Bard Enters 2020

So it’s somehow fitting — Shakespearean, even — that the former reality television star who thought he could define his own reality and bend nature to it found himself in hospital with a life-threatening condition.

The best medical care in the world won’t save him against a virus that doesn’t adhere to “alternate facts.” Playing fast and loose with the truth by purveying pandemic misinformation is lost on nature.

The credibility of this administration and all things Trump is so shredded that there was a dubious reaction globally to the initial news of the Trumps’ infection (Melania Trump also tested positive), and widespread disbelief of official updates on his health.

“What we’re seeing is a very healthy scepticism about anything that comes from the White House,” Kurt Badella, an advisor to the anti-Trump Republican organization The Lincoln Project, tweeted. “These are the same people who have been lying about everybody else’s health in terms of the impact of Covid-19, so why would we expect any differently when they’re talking about themselves?”

“We have an administration that long ago squandered its credibility,” agreed Dan Rather, a senior television journalist covering politics since the early 1960s.

I Don’t Get It

In 2016, as an American expat for most of my adult life, I no longer understood a country that could elect a president whose reliance on lies had been abundantly documented by reputable sources. Now, as a Luxembourg citizen and European, I understand still less a country where, according to polls, some 43% of the electorate still supports him — a man who lies to them as easily as he breathes.

If for no other reason — and there are many — his legitimisation of lying alone disqualifies him for the post of the world’s most powerful figure. Forget “The Art of the Deal,” as his bestselling book was titled. He has made lying an open and acceptable practice, not least for the Republican Party that defends, supports and rallies around him.

His lying gives new cover to autocrats and political elites around the world who routinely mislead their people in an effort to maintain their control, both economically and politically. No longer can America even pretend a veneer of honesty regarding the dissemination of information from its top officials when every day brings fresh examples of their leadership by mendacity, starting with POTUS himself.

“Trump has built what might seem to many people a ridiculous, completely fabricated image on a mountain of lies.”

– Mark Salter, former aide to John McCain

“Trump has built what might seem to many people a ridiculous, completely fabricated image on a mountain of lies,” Mark Salter, a former aide and speechwriter for the late Senator John McCain, told the New York Times. “But that’s his story, and he’s sticking by it.” 

Hope for the Future

When the age of Trump is in the rear-view mirror at last, politicians will still lie and officials will still misinform and mislead. My hope, though, is that this bizarre, unreal and surreal epoch, when so many people stopped caring about the difference between the real and the imagined, won’t define the future.

The public’s health — and survival — depend on it.

Again, we founded VitalBriefing to battle misinformation by providing market intelligence that our clients can trust. You can apply the same standards we do in your own consumption of media — especially important regarding Covid-19 and especially when a figure as important as the American president, and his administration, ignores those standards for their political gain.

So, here are six questions to ask when you’re judging the quality of that information and deciding what’s fake news and what’s real:

  • Is the publisher credible?
  • Is the writer/author/creator credible?
  • Is the story itself credible?
  • Who is actually in the story?
  • Is the story timely?
  • How’s the quality of the writing/presentation?

Finally, this video provides a nice textbook example of how not to get fooled. Enjoy:

What We Must Learn From Covid About Lies And Misinformation

doctor and the text infodemic in a tablet

In the classic, ever-relevant 1976 movie, Network, deranged television news anchor Howard Beale exhorts his viewers to stand up, go to the window, open it and yell for all to hear: “I’m as mad as hell and I’m not gonna take this anymore.”

That’s how I feel these days — endlessly angry, frustrated and heartsick over so many aspects of our current global reality.

But at the top of my personal list is the horrifying ascendence of deliberate lying by political and government leaders, their spreading of false and misleading information, and the steady and wilful erosion of critical thinking among people who should know better than to ignore or subvert undisputed facts in favor of unproved, dangerous or hateful beliefs.

I’m a native citizen of the United States and a recent citizen of Luxembourg. and Europe. I promise that I’m putting my politics aside for this piece.

Flashing Lights, Screaming Sirens and Covid Misinformation

With that caveat in mind, to me there is no greater signal of just how dangerous these times are than the persistent and consistent disavowal of fact-based thinking by President Donald Trump and many of the officials and advisors around him as they confront the Covid-19 pandemic. (I’m leaving aside the many other issues to which this thought applies — for example, climate change, or the use and abuse of the pandemic for political advantage, like taking credit for a vaccine that doesn’t even exist yet, or promising miracle cures where there are no miracles.)

Bleach injection, anyone? Blood plasma treatment? Perhaps a hydroxychloroquine cocktail? Or the ‘exemplary’ way they say they have managed the pandemic as people continue to die?

For me, it’s the loudest indication — deafening-siren, blinding-flashing-light loud — of these dark times and the threats to our global future.

Life Was Simpler

I once co-authored a general health book with an American doctor who hosted nationwide television and radio shows aimed at debunking phony medical stories. “The biggest threat out there,” we wrote, “is wrong or distorted information.”

That was in 1999, during the quaint days of widely-read, responsible, mainstream newspapers and news magazines and massively-watched television talk shows. Also, it was long before Facebook, Twitter, QAnon, and all manner of Internet-propagated lies and conspiracy theories were believed and traded by tens of millions of allegedly sentient people.

Yet, we felt compelled to devote a chapter entitled “Trust the Media at Your Peril” to the kind of problem that today literally threatens lives and undercuts responsible governance.

Little did we imagine the world we’d be facing now, where the traffic in life-threatening untruth rides an Internet superhighway into the minds of millions of the too-easily-fooled.

Sounding the Alarm

Last week, two doctors, Seema Yasmin and Craig Spencer, wrote an opinion piece in The New York Times about their efforts to counter the Covid misinformation epidemic hampering efforts to beat the pandemic. “We’ve been working to dissect and debunk the many myths about this new virus, its potential treatments and the possibility of a vaccine. We read the mistruths on our patient’s phones, listen to theories borrowed from internet chat rooms and watch as friends and family scroll through Facebook saying, “Here — it says that this was definitely created in a Chinese laboratory.”

They cite a chilling report by the citizen activist group Avaaz that lays significant responsibility for the massive spread of Covid misinformation at Facebook’s door, calling its algorithm “a major threat to public health” and charging, among other things, that networks in five countries spread global health misinformation that attracted some 3.8 billion views in 2019, clocked 460 million views in April 2020 alone, and that top health-misinformation sites got four times as many views as organisations including the World Health Organization and US Centers for Disease Control.

Covid misinformation has been cited by a variety of medical experts as an ongoing threat. In February, the World Health Organization issued a “Coronavirus Situation Report” in which it warned that the pandemic “has been accompanied by a massive ‘infodemic’ – an over-abundance of information – some accurate and some not – that makes it hard for people to find trustworthy sources and reliable guidance when they need it” and that “the most prevalent rumours…can potentially harm the public’s health, such as false prevention measures or cures.”

Yasmin and Spencer, who are a clinician and an emergency room doctor, see the consequences of this Covid misinformation every day in their workplaces. “Patients question our evidence-based medical guidance, refuse safe treatments and vaccines, and cite Facebook posts as ‘proof’ that Covid-19 is not real.”

And while they’re right that “purveyors of false news will always exist” and that “for as long as there have been epidemics there have been snake oil salespeople exploiting fear and peddling false hope,” social media as a channel for its propagation and magnification takes it to a new level of destructiveness.

'Hoax' spray painted over Covid-19 information sign

Looking for Hope

I find it hard to be optimistic that after four years of deliberate lies and misinformation — not to mention breathtaking managerial incompetence — Donald Trump has a very real chance of reelection.

All other issues aside, the fact is that his boldface denial of scientific fact and evidence isn’t in itself enough to guarantee that voters will turn him out. How depressing is that?

In the New York Review of Books, the terrific British journalist Jonathan Freedland lays out in Disinformed to Death the price we pay for deliberate ignorance.

“When a pandemic is raging, it becomes harder to deny that rigorous, truthful information is a mortal necessity. No one need explain the risks of false information when one can point to, say, the likely consequences of Americans’ coming to believe they can deflect the virus by injecting themselves with bleach.”

He hopes for a receptive audience that, as a result of the pandemic, “has seen all too starkly that information is a resource essential for public health and well-being—and that our information supply is being deliberately, constantly, and severely contaminated.” 

I have to admit that it’s a challenge not to despair that the counter-efforts seem not to get a sufficient foothold.

Global Scope, America First

Much as I obsess over the tragic sinking of my native country into a sea of disinformation and deliberate lies, the issue — like climate change — is truly global. Freedland cites work by Oxford Internet Studies professor Philip N. Howard that documents 70 governments with “dedicated social media misinformation teams, committed to the task of spreading lies or concealing truth.”

This includes two million Chinese whose jobs are to grind out some 450 million messages each year, Vietnam’s 10,000 students dedicated to pushing the government line, and Russian bots generating nearly half the discussion on Twitter in that country.

data on global use of disinformation and misinformation
Source: OII / University of Oxford

Yet, in a recently-published book, Howard argues that the United States has seen disinformation spread more widely and deeply than anywhere else. With the “highest level of junk news circulation…during the presidential election of 2016…there was a one-to-one ratio of junk news to professional news shared by voters over Twitter.”

Howard calls them “lie machines,” while another author, Thomas Rid, calls them direct threats to a “political system that places its trust in essential custodians of factual authority,” in which he includes science, the academy, journalism, public administration, and the justice system. 

When I co-founded VitalBriefing in 2011, our tag line was “the cure for information overload.” We had seen a need in the marketplace for reliable, trustworthy information authored by credible professional journalists — calling on a notion I had written in the 1999 book: “Legitimate journalists would never report something that they knew to be untrue.”

We have seen a growing market need both in the private and public sectors for information our clients and prospects can trust. I’m immensely proud of the small part we can play to counter the massive and deliberate attack on facts.

Like Freedland, my hope is that the global pandemic will lead to a re-set for audiences around the world as they confront the reality of a pandemic that doesn’t care what lies Trump, Vladimir Putin, Jair Bolsonaro and other irresponsible and immoral leaders tell about it.

Because bad information can kill you, or someone you love.

From the 2008 Financial Crisis to Coronavirus Recession: Are the Banks Safe This Time?

It took massive public-sector bailouts financed by unprecedented levels of borrowing to reverse the global financial crisis of 2008-09 brought on by rash lending and investment policies of banks in the United States and elsewhere. With the world on the brink of a coronavirus-triggered recession, how is it different this time?

“In 2008, the banks were to blame for the crisis, but the real economy was not in crisis,” CSSF CEO Claude Marx observed recently. “Now we are in the reverse situation, where a health crisis is causing an economic crisis, and…the banks are part of the solution.”

In fact, the abrupt cutback of bank lending in 2008 and 2009 contributed to the plummet of most countries’ economies into recession.

However, Marx notes, the confidence enjoyed by the banking sector is a critical aspect of governments’ response to the current coronavirus pandemic. One reason: new rules designed to ensure that institutions are substantially better capitalised than 12 years ago, as well as guarantee schemes expanded to protect retail deposits.

Imprudent parents

Increased transparency affecting both regulators and investors, as well as tools such as stress tests, have been established to prevent both a ‘business-as-usual’ mentality and disregard of the lessons of the century’s first decade.

In the grand duchy in particular, cautious business practices are a well-engrained habit already. For that, we can credit the two Luxembourg institutions that required state rescue: Dexia BIL and Fortis Banque Luxembourg, both brought down by the imprudence of their parents abroad.

For the most part, privately-owned commercial banks have played the key role in channelling government funding into loans and guarantees to preserve businesses and jobs.

But Marx acknowledges that the risk of a recession brought on by the coronavirus cannot be ruled out altogether.

If the economic shutdown prompts widespread bankruptcies and defaults on the share of government-backed loans where the risk is retained by commercial institutions, as well as on previous lending, we may be headed again for trouble.

Because of the banks’ capital strength, and in several cases deep-pocketed shareholders, the risk of a coronavirus-based recession affecting Luxembourg is lower than in most other countries.

But policymakers worldwide must consider seriously the risk as the confidence of a rapid rebound that was widespread just months ago — remember the famous V-shaped recession and recovery? — has begun to fade.

Today, economists are illustrating the recovery with hockey stick charts more like Nike’s trademark swoosh logo.

Risk of losses

Federal Reserve chairman Jerome Powell has argued that US economic activity could contract temporarily by as much as 30% and that a full-scale recovery may be delayed until the end of 2021. He says it depends on people regaining confidence that their risk of illness is low, which in turn may rest on the widespread availability of a Covid-19 vaccine.

He expects unemployment to continue to climb for at least another couple of months before a rebound begins in the second half of this year.

Already, the Fed has warned in its semi-annual report on financial stability that US banks are at risk of material losses that could strain even their post-financial crisis capital and liquidity buffers, as well as the billions of dollars they have set aside in provisions for potential non-performing loans.

Any renewal of volatility in financial markets could create additional financial stress if asset prices fall, it adds.

There is also concern in France’s banking sector about the longer-term implications of the government’s credit guarantees. Industry members warn that a significant number of companies taking government-backed loans could be heading for a debt crunch over the next next years — perhaps as early as this summer — given that their profitability is likely to remain depressed for some lime.

Encouraged by the European Central Bank’s ultra-low interest rates, companies have been loading up on debt in the form of bank loans and bond issues for years.

“The risk is that by putting French companies that were already not in good health on life support, we could be adding a financial crisis to today’s consumption crisis, perhaps in a year, when companies are no longer able to refinance themselves and banks may be closing the credit taps,” worries Pierre-Arnoux Mayoly, a partner with law firm McDermott Will & Emery.

Apart from general concern about businesses, especially small ones, and households whose financial equilibrium may have been eroded by loss of income since March, policymakers are closely examining companies in particularly vulnerable sectors, along with those that were already heavily indebted before the pandemic took hold.

Potential problem areas that were already causing concern before the pandemic include highly-leveraged hedge funds disproportionately affected by market volatility and asset price declines.

They also may have contributed to the turbulence by having to sell assets to meet margin calls or reduce portfolio risk. A year ago 14% of US hedge funds accounted for half the industry’s net borrowing.

Leveraged but not covenanted

Red flags are also waving over so-called leveraged loans — lending to companies that were already highly indebted, typically with debt exceeding five times their earnings before interest, tax, depreciation and amortisation (ebitda).

These include a significant number of private-equity-owned companies burdened with debt from their acquisition cost or from special dividends paid to investors — paid not out of profit but additional borrowing.

Analysts say the two high-profile, private equity-owned US retailers, J. Crew and Neiman Marcus, that have filed for bankruptcy over the last two months were crippled by debt burdens — $1.7 billion and nearly $5 billion respectively — that prevented them investing to meet the challenge of e-commerce and new shopping habits.

The sector’s problems aren’t purely coronavirus-recession-related. Indeed, they have been worsened by the steady erosion over the past seven years of loan conditions imposed by banks, especially for leveraged loans and private equity-backed companies.

This trend has developed over the past decade amid rock-bottom interest rates that prompted lenders to compete for the business of more lucrative but riskier borrowers.

According to Moody’s, syndicated leveraged loan covenant quality set a decade-long low in the fourth quarter of 2019, with the majority of credit agreements permitting, for example, collateral-stripping asset transfers, the retention by owners of excess cash flow of the proceeds of asset sales, and substantial ebitda adjustments.

Easing capital rules to avoid a coronavirus downturn

Meanwhile, central banks and regulators have been accommodating with banks in the interests of keeping loans flowing into the economy, allowing institutions to draw on capital buffers introduced since the global financial crisis and to delay for a year compliance with new Basel III capital standards, measures designed to prevent a repeat of the banking sector’s problems in 2007-09.

The European Parliament is considering legislation that would ease stricter bank leverage ratio requirements due to take effect next year.

In addition to a one-year delay, the European Banking Federation also is backing an existing measure that would allow national regulators to exclude deposits held at the European Central Bank from their balance sheet total for the purposes of calculating the ratio.

Some governments want to go further. France’s finance ministry says the government-guaranteed loans issued by banks should receive the same treatment. There are even calls for the state debt on banks’ books to be excluded from leverage ratio calculations, a measure already temporarily in place in the US.

So while the banking industry may be confident right now that this time it is not the problem but the solution, a little caution is appropriate — the potential of a coronavirus recession is very real.

Neither the Covid-19 pandemic nor its economic consequences are close to being fully played out, and not even the most prescient expert can predict with assurance where all the chips are going to fall — or when.

You might also be interested in: Coronavirus’s Impact On Sustainability – What To Expect

I Dare To Hope That We Will Not Waste This Crisis And Get The Wake-Up Call From Nature!

Raymond Schadeck
Raymond Schadeck, Member, VitalBriefing International Advisory Board

In my April 2nd article (I dare to hope that the world after COVID-19 will no longer be as it was), I referred, among other ideas, to the link between the current turmoil generated by COVID-19 and the effects of climate change.

I also shared my deep hopes that with our full support as corporates and private citizens, decision-makers “will dedicate the same energy and authority toward the development and deployment of a similar action plan to cure and save the lungs of our planet, i.e. our forests and trees”. Indeed, as Indian author and environmental activist Arundhati Roy puts it: “Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next.”

Personally, I don’t see why this shouldn’t hold true in our current context or why we would be too foolish to miss this opportunity to mend what is broken.

As Winston Churchill noted, “we should never waste a good crisis”!

Let me develop this idea further by first repeating the direct links between this virus and climate change followed by an investigation of the major parallels, but also differences between the two. In doing so, I aim to provide some reflections on the lessons learned from COVID-19 and ideas on how to take this fight forward.

COVID-19: A message from nature!

The COVID-19 virus attacks our lungs or, more precisely, the pulmonary alveoli at the exact point where the exchange between air and blood takes place. Scientists have made it very clear that forests and trees play a similar role for our planet as lungs do for us.

As such, forests and lungs are integrally connected. In 2011, when Milda Sebris turned 100 at the Ellen Memorial Health Care Center, she described this symbiotic relationship so beautifully: “To breathe is to live embodied. Without this exquisite process going on day after day, year after year, moment after moment we would not be functional – we would not be alive! Trees help the planet breathe by turning carbon dioxide into clean, pure oxygen. Plants are considered the lungs of the earth because plants produce oxygen, which is necessary for all life, so in essence, since our lungs keep us alive and trees keep our lungs alive, we can consider trees to be a part of our lungs’ existence. This is all part of the deep interconnectedness of all life”.

Scientists provide any evidence we need (except for those who cannot or do not want to understand) as to how much our increased CO2 emissions and our continued killing of forests, and the global warming that comes with it, have been deeply linked to the development of dangerous viruses over the last decades. Of all emerging infectious diseases, 75% come from wildlife and our destruction of the natural habitat for farming, mining, housing and energy.

So, we need to make a choice: Do we want to live in harmony with nature, or will we keep fighting it?

It’s obvious – and we’ve received a clear demonstration of it over the last weeks – that the planet does not need us to survive but we desperately need it. In fact, we are the most dependent of all different forms of life. Nature on the other hand, existed long before us, and even seems to be better off as we humans are confined. As we have been immobilized, Nature serenely carries on; it keeps growing, keeps breathing, keeps giving life irrespective of the turmoil humankind is currently facing.

Inger Andersen, Executive Director of the United Nations Environment Program (UNEP) states it so well: “Nature is sending us a message…we are intimately interconnected with nature, whether we like it or not. If we do not take care of nature, we do not take care of ourselves. And as we hurtle towards a population of 10 billion people on this planet, we need to go into this future armed with nature as our strongest ally“.

I hope we get this wake-up call nature sends us!

Parallels and differences between COVID-19 and climate change

A sad parallel can be drawn around the president of the United States, who has denounced both COVID-19 and climate change respectively as a “Chinese hoax” and as topics embraced by Democrats in hopes of winning the November elections. With both crises far from being a hoax, we must look deeper and analyze the serious parallels and differences that exist between COVID-19 and climate change. They must be laid out and understood with clarity so that we may generate much-needed buy-in from the public and become proponents of a well-thought-out strategy that can tackle climate change with the urgency it deserves.

The first major parallel between COVID-19 and climate change is that both seem primarily to hurt the most vulnerable segments of global population. Climate change, through its global warming effect, has disproportionately impacted developing countries that often lack the required infrastructure to cope with such drastic changes in climate, weather, and natural disasters.

Even within OECD countries, the most vulnerable people of the population suffer the most, for example the elderly, those with pre-existing health problems and those whose immune functions have been weakened by their living conditions. Therefore, as we discuss which segments of our population should be most protected and receive priority access to health services, we must realize that in developing countries, and even some developed countries, health care is far from a given. In fact, half of the world’s population has no access to the health care it needs.

Similarly, with respect to climate change, it is those countries — at this stage at least – that are the least affected by the effects of global warming and which have the required infrastructure to cope with its effects — and are responsible for the vast majority of CO2 emissions. Here again we can draw a parallel with the current pandemic where those who are most responsible for spreading it are not necessarily those who will suffer the most!

Another major parallel is the need to react and act with the highest sense of urgency! Both COVID-19 and climate change have the potential to be catastrophic for humanity but they operate on different timescales. If the degree of emergency is the same for COVID-19 and climate, the speed of our respective reactions is far from the same.

This does not come as a surprise as both are not actually perceived with the same sense of urgency. In terms of the pandemic, we feel it and we suffer from it today; climate change, on the other hand, started by affecting the more southern countries first and, as such, is perceived by us (if at all perceived) as a remote and not immediate threat. It’s not knocking at our front doors the same way COVID-19 is.

I dare to hope, though, as the link between climate change and an increased risk and frequency of pandemics is clearly proven, that this pandemic will allow us to understand and perceive the real gravity and urgency of the climate issue before it might be devastating in its impact and possibly become irreversible.

In fact, there is another major difference here: while health conditions might eventually go back to normal, many of the damages caused to our environment are irreversible. So, we need to accept that if we do not change anything, we will globally surpass the Paris Agreement targets by 2028.

Yes, in 2028 and not in 2050 as planned in the Paris agreement. Despite the good intentions of all the signatories of the Paris Agreement, today there is only one single country that has developed and deployed a concrete action plan to meet the commitments taken by all, and that is Morocco. However, Morocco cannot win this battle on its own.

Major lessons learned

Optimist by nature, I am pretty confident that most of us – whether policy-makers, decision-makers, businesswomen and men, citizens, elderly, young, wherever we may live – will come out of this crisis with a strong commitment not to go back to ‘normal’, as ‘normal’ has clearly proven to be ‘the’ problem. And I hope that we will learn as much as we can from the present crisis to avoid repeating the same or similar mistakes going forward.

First, COVID-19, as well as climate change, are global issues, and as such they need a global response: we need to listen to the warnings and trust the assessments of scientists and other experts.

The present crisis has proven that despite the level of the crisis varying by country or community, we try as best as we can to align approaches among countries and are ready to help each other when needed — for example, China helping Italy, or Luxembourg taking on emergency cases from Lorraine.

Yes, there will always be selfish decision-makers (like in the US or Brazil) who continue to defy scientists and who do not see the value of global cooperation. But that should not serve as an excuse to all others not to join forces. And I dare to hope that the citizens and voters of countries who refuse to buy into a shared strategy will be smart enough to realize over time that the personal selfishness that drives their leaders’ actions will not pay off in the medium and long term.  

But more importantly, I hope we realize that we need to acknowledge and react to the warnings we receive. Though we’ve had scientists pushing us to recognize the increasing risk of pandemics for some decades now, we must admit that we have not done much to prepare ourselves for that risk over the last years. It is now that we need to make the fight against climate change a priority, combat its root causes and reduce CO2 emissions to zero.

Time is of the essence if we want to avoid dire emergency situations going forward. It is crucial that we embrace the warning calls with respect to climate change and act now. The Paris Agreement cannot remain a best intention only. All the countries that signed it now need to develop a serious action plan – not only a best intention plan – to make it happen. Morocco has shown us the way!

This COVID-19 crisis has demonstrated clearly that it is those countries — South-Korea, Taiwan, New Zealand, Finland, Norway, Iceland…– which were the fastest in trusting expert opinions as to the magnitude and risk of the issue, and which were the fastest, in partnership with those same experts, in taking appropriate measures, and which are coming out of this crisis the best.

The fact that many of these countries are currently under the leadership of female top decision-makers should make us reflect on whether there is a clear root cause relationship between both. This interesting topic has generated a lot of discussions lately around questions like: Is there a cultural aspect to it? Meaning, is the culture of those societies encouraging and supporting female leaders more than others, or do citizens trust female political decision-makers more? And if ‘yes’, why is this the case? Do women have better competencies to deal with crisis situations? Are they less selfish?  

It is definitely not my intention to enter into that discussion here. I leave it to the experts. Although I realize that all those countries that have best handled this COVID-19 crisis seem to have something in common — following the experts’ advice and learning from the experience of first-hit countries, they all developed a crisis action plan which:

  • gives the highest level of priority to public welfare, not only in the short term but also in the medium and long term (as opposed to continuing to pursue short-term economic and financial gains)
  • was not led by, what I would call, selfish ‘action heroes. Quite the contrary: these plans favored constructive cooperation over selfishness and a competitive spirit.

And — surprise, surprise – I dare not to hope this time but, rather, to confirm that again this is exactly what is needed to fight the large looming climate crisis!

In fact, as we speak about climate change or the broader sustainability challenge, we tend to speak about ESG (Environment, Social and Governance), or more specifically about the triple bottom line of PPP (People, Planet, Profit) — for example, about strategies that do not chase only the highest short-term profits but also those that recognize a healthy balance between serving, developing, rewarding and respecting people at all levels, not harming the planet and generating reasonable profits.

And what makes me even more hopeful, not to say confident, for the future is that large parts of the respective populations agreed to these strategies and accepted all the sacrifices of being confined, of not being able to see family members and friends and to shop freely, having to wear masks, on and on. And they all endorsed a crisis management strategy that re-prioritizes objectives, puts the public well-being at the top, recognizes that sacrifices need to be made by all and redefines the roles of each of us.

So, if the citizens endorsed it for COVID-19, why should we not utilize this momentum and build on their compliance for a thoroughly developed climate change action plan? The impetus is there. What’s left to do is to realize the urgency of fighting climate change and developing a plan that clearly defines the expectation and role for each of us.

Way forward – we all have our role to play!

Going forward, all of us – political or economic decision-makers, associations, media and journalists, employees or workers, retirees, teachers or students – need collectively, but also individually, to adopt this ESG, or triple bottom-line mindset. If most or all of us collectively and as individuals assume our respective responsibilities, there is no doubt we will win the fight against climate change. We have demonstrated that we can make it happen for the COVID-19 crisis. We have realized that “if we replace the ‘I’ with ‘We’, even ‘Illness’ becomes ‘WEllness’“. There is no reason we should not be able to do the same with the climate crisis.

Media and journalists

This COVID-19 crisis is a tragic reminder of the key role played by our media and just how essential fact-based, outspoken journalism is. It has also demonstrated the crucial responsibility of journalists to push back on fake news and those decision-makers who try to hide or even deny plain facts.

During this COVID-19 crisis many journalists have realized and reinforced the kind of public service role they have in keeping us informed as factually as possible and challenging those who tried to spread fake news or hide information. Now we count on them for deploying the same rigor and required urgency towards the most important challenge of our time: climate change. We now need these same media and journalists who have done such an exceptional job in this pandemic to use the same best practices when reporting on climate change and its risks, including the increased risk of future pandemics.

Economic and financial decision makers

As already mentioned in one of my previous articles, I strongly believe that the current crisis will drastically increase the urgency and pressure on companies and their decision-makers to convert to more sustainable business models and adopt a real triple bottom-line strategy.

The objective of such strategies will obviously remain to generate enough profits to assure their long-term viability. However, they will achieve this in full respect of people (employees, suppliers and people in the supply chain, clients, shareholders and any other stakeholders) and without damaging our planet any further. They need to realize that it is a matter of survival that extends well beyond the short term.

The current pandemic has made all of us more sensitive to the effect of nature on our well-being, to how desperately we need our family and friends around us. It has made us move from a pretty materialistic set of values to a more sober set of values positioned around caring and solidarity or, as I’ve phrased it previously: ‘to be’ has taken the lead on ‘to have’.

Hopefully, the result of this change in mindset is that in the near future we will all be much more sensitive to these same values when choosing how and with whom to spend our time and money. Companies that do not realize that their ‘why’ (why they exist, i.e. their purpose and values) and their ‘what’ (what they stand for) are much more important than the quantity and price of what they sell, might have no future!

Political decision-makers

We have realized how effective many political decision-makers – in close partnership with scientists – have been in identifying early on the upcoming risk, in developing and deploying concise mitigation packages and even in preparing for the impacts that couldn’t be avoided.

Their actions are rooted in the conviction that public welfare must be the top priority in a crisis. I dare to hope that these same politicians, strengthened by the endorsement they’ve received, will now have the comfort and motivation to tackle the climate change crisis with the same determination. Just as they did for COVID-19:

  1. I hope that our political decision-makers will trust our scientists and inform their citizens factually about the looming threats of climate change, not only for their own nations but also for our global population as well as future generations. I have no doubt that the efficiency of their partnerships with media and journalists during COVID-19 can be replicated, even strengthened, in the context of climate change.
  2. I also hope that leaders will not only develop but also deploy targeted mitigation packages: indeed, as signatories of the Paris Agreement, many countries have communicated extensively about their respective commitments. Some have even done a good job of developing thorough roadmaps to accompany those commitments, although we can’t ignore the extent to which deployment plans are drastically lagging behind. The obvious risk now is that with the substantial public support and finance packages centered around COVID-19, deployment of climate change, mitigation strategies might drop down from the top of the priority list.

    Climate change mitigation needs to become a core element of these same COVID-19 support packages. It would be irresponsible towards younger generations not to tie eligibility for these support packages to sustainable development obligations from beneficiaries. It would be irresponsible to utilize current stimulus packages to finance dying sectors of the economy that have no future in sustainable business. It would be irresponsible to finance fossil fuel companies for anything other than their transition program to cleaner energy technologies.

    Hearing many of the key decision-makers over the last weeks, I am pretty confident that most of them got the message. As the Prime Minister of France recently noted in an interview with the Financial Times:“There is a realization that if people could do the unthinkable to their economies to slow a pandemic, they could do the same to arrest catastrophic climate change”.
  3. I believe that there has never been a better moment to start converting our present ‘labor-based’ tax system to ‘a natural-resources and pollution-based’ system. The present labor-based system causes unemployment as it encourages companies to minimize human resources, while leaving natural resources untaxed, thereby stimulating overconsumption and pollution.

    As the COVID-19 crisis will dramatically increase the challenge of unemployment, there could not be a better moment to start this transition than now. An increase in taxation on scarce natural resources not only will allow us to protect our environment but also to reduce the cost of labor, thereby mitigating – at least partially – the risk of unprecedented unemployment levels.
  4. Finally, governments also have realized how crucial it is for them to lead by example and, as such, they should do the same with respect to climate change. Just imagine the strength of the message to our local Luxembourg community, and the powerful global branding opportunity for our financial marketplace, if Luxembourg were the first country able to claim that all of our cash in the public pension scheme is invested exclusively in sustainable finance products and offerings. And nothing, really nothing prevents us from doing so. It just might require that we as citizens (because in the end it is our money managed by public authorities) express our support and, if needed, exert pressure on the public officials who manage our pension funds.

And that brings me to the last category of actors with the means to play a crucial role in all of this.

We the citizens! We the consumers!

The key role lies with us as citizens and consumers.

I am pretty convinced that, due to the aforementioned shift in our mindset and values, we as citizens are ahead of both political and economic decision-makers in terms of our determination to fight climate change. Therefore, we must use the power offered to us by technology and media to make ourselves heard. Decision-makers need to hear us loud and clear: that we not only support them in their responsibilities in the fight against climate change, but that we require it from them and that we will sanction those who don’t act.

Here again, there is no better way to exert pressure on economic decision-makers than to lead by example. We need to change our behaviors clearly: fly less, and if we do fly, then choose the company with the most sustainable offer; consume less and consume locally; spend our euros on companies with a clear sustainability focus; use the most sustainable transportation offerings and all become active agents of a circular economy. We have demonstrated that we can do it if our hand is forced – so why not take a more preventive (and comfortable) approach over time for climate change, as opposed to a delayed, reactive (and uncomfortable) approach once the panic spreads?

We need to realize that it is all in our hands! If we citizens start to move in this direction, political and economic decision-makers, even the media and journalists will have to follow – or else they won’t survive.

So, in my opinion we are all set to unleash a similar arsenal of mitigation and management strategies to the climate change crisis as we have with COVID-19. There is no doubt about this. The last remaining challenge is to adopt the right behavior. This can be difficult in our western countries, where the climate crisis is not yet felt as dramatically as in other parts of the world.

The most powerful illustration to convey the required sense of urgency might be the famous “boiling frog” fable that says:

  • If a frog is put suddenly into boiling water, it will jump out and survive – this is exactly what happened to us in the COVID-19 situation. 
  • But if the frog is put in tepid water which is then slowly brought to a boil over time, it won’t perceive the danger and will be cooked to death – this is exactly what risks humanity if we fail to realize the urgency of the risk posed by climate change.

To conclude, I will leave you with the powerful words of Inger Andersen, whom I already referred to in the introduction: “The better we manage nature, the better we manage human health…because keeping nature diverse, rich and flourishing is part and parcel of our life’s support system….we need to see how prudent management of nature can be part of this ‘different economy’ that must emerge, one where finance and actions fuel green jobs, green growth and a different way of life, because the health of people and the health of planet are one and the same, and both can thrive in equal measure.”

(N.B. Big thanks to you, Julie and Felix, for your support)

You might also be interested in: Coronavirus’s Impact On Sustainability – What To Expect

Coronavirus’s Impact On Sustainability — What To Expect

Coronavirus face mask with world map on green background
Will the coronavirus pandemic turbocharge or cripple sustainability?

As it touches every aspect of life and business, already the coronavirus is impacting sustainability. The big question now: what can we expect in the long-term?

Among the myriad uncertainties of the Covid-19 pandemic, there is one sure thing: The natural environment has been a beneficiary of economic shutdowns and human lockdowns.

With virtually no cars on the road, nor factories belching smoke, the skies over New Delhi and Shanghai have turned from brown to blue.

Atmospheric pollution has diminished from the near-disappearance of air traffic.

Carbon emissions have shrunk dramatically as industrial production plummets.

Now, we all must ask whether these benefits will be temporary. Around the world, governments are looking at how to restore normal economic activity as soon as possible without risking a fresh wave of infections. This process is already underway in China, although the country’s economy remains constrained by the slump in demand for goods and commodities elsewhere in the world.

Indeed, some countries have announced or are considering measures that would, at least temporarily, lower environmental standards or defer efforts to curb carbon emissions. Their rationale? The need to re-ignite economic activity and preserve jobs is currently more pressing than protection of the natural environment or restraining climate change.

They also argue — not without justification — that poverty and deprivation also impact human health, physical and mental.

Don’t be fooled

The choice, however, is a false one, according to David Boyd, United Nations special rapporteur on human rights and the environment. Such policy decisions, he warns, “are irrational, irresponsible, and jeopardise the rights of vulnerable people. [They] are likely to result in accelerated deterioration of the environment and have negative impacts on a wide range of human rights, including the rights to life, health, water, culture, and food, as well as the right to live in a healthy environment.”

Boyd argues the coronavirus outbreak itself has underlined the importance of a safe, clean and sustainable environment. “People living in areas that have experienced higher levels of air pollution face increased risk of premature death from Covid-19,” he says. “Access to clean water is essential in preventing people from contracting and spreading the virus.”

Epidemiologists also note that the majority of new infectious diseases affecting human beings — including Ebola and SARS, as well as Covid-19 — have been transmitted from animals to humans, and argue that they’re becoming more common as human encroachment on animals’ habitat brings species into closer and more frequent contact that facilitate the spread and evolution of disease.

It’s far from certain that current arguments in favour of sustainability will prevail over the drive to restore economic activity and prosperity (and to relieve governments of the financial responsibility for providing their citizens with the necessities of life and preventing companies from collapse).

Is Covid-19 proving that sustainability is more profitable?

However, the impact of Covid-19 has added weight to arguments that sustainability-focused investment often performs better than portfolios that ignore environmental, social responsibility and governance factors (ESG). A key claim of ESG advocates is that the risk of unforeseen environment-related events is greater than commonly believed.

According to financial analytics provider Morningstar, during March investment funds that incorporate ESG factors into their strategy outperformed comparable vehicles that do not. Share prices of the latter crashed around the world after governments imposed lockdowns and closed many businesses to prevent the spread of the infection.

Morningstar found that ESG-filtered or sustainability-focused, Europe-domiciled actively managed funds performed better in three investment categories — although they did worse in a fourth — and all categories of ESG and sustainable exchange-trade funds outperformed non-ESG peers.

It may be that March, a month that saw extreme market volatility, wasn’t particularly representative of ‘normal’ trading conditions. ESG funds generally avoid sectors such as the airline industry and oil and gas companies, which were especially hard hit by the shutdown of international travel and the evaporation of energy demand.

However, Morningstar also found that two-thirds of sustainable funds performed better than an average of all comparable funds, sustainable and non-sustainable, over the first quarter as a whole.

Caring about stakeholders

More fundamental factors may be at play, argues Hortense Bioy, Morningstar’s director of passive strategies and sustainability research. “Companies that score high on ESG tend to be large, well-run businesses that treat their stakeholders well, address environmental challenges, enjoy more conservative balance sheets, and have lower levels of controversies,” she says. “Many such companies tend to be more resilient during market downturns.”

These arguments would suggest that in the future, discerning investors will pay greater attention to ESG factors and that companies failing to meet the criteria or to demonstrate a move toward more sustainable business models will find it harder and more expensive — and perhaps eventually impossible — to finance themselves.

Meanwhile, there are indications that some of the changes in human habits and practices forced by the pandemic and lockdowns may have a long-lasting effect.

Companies have been obliged to accommodate the reality of teleworking, and both they and their employees may continue to embrace benefits such as the absence of commuting, reduced workspace costs and the huge savings offered by teleconferencing over business travel.

Coronavirus could usher end of low-cost flying’s golden age

Already stigmatised by climate activists, the airline industry may be transformed by Covid-19 and the golden age of low-cost air travel abruptly brought to an end. Analysts see a wide range of possible effects, including the largest aircraft grounded permanently, many carriers bankrupt or their numbers drastically cut, and far higher air fares.

At a time when renewable energy is starting to compete with fossil fuels on cost, the collapse of oil prices may shake up the industry, for example, with many shale oil ‘frackers’ and other high-cost producers driven out of the market — although the lowest oil prices in nearly two decades don’t immediately encourage the transition to renewables at a time of economic constraints.

Still, nothing can be taken for granted. Worldwide carbon emissions shrank by 1.3% as a result of the global financial crisis of 2008-09, an event that also was predicted to trigger a fundamental economic shake-up that didn’t materialise — only to rebound in 2010.

But maybe, just maybe, this time really is different.

If you’re interested in sustainability and green finance, you should read:

I Dare To Hope That The Verb “To Be” Has Unequivocally Taken Over The Verb “To Have”

Raymond Schadeck, a member of our International Advisory Board asks “To have and to be: what if we inverted our values?”

Raymond Schadeck
Raymond Schadeck, Member, VitalBriefing International Advisory Board

In my last article, when referring to Maslow’s famous pyramid of needs I noted that in this period of crisis, basic primary needs tend to regain in importance at the expense of other more material and ancillary needs. I also expressed my hope that the moral reappreciation of certain professions, which have become the keystones of the management of this crisis, could serve as the basis for a thorough re-assessment of the real impact of all professions in our society and respective adjustments in remunerations.

A utopia ? 

These two ideas, at first sight seemingly foreign and separate, in my opinion indeed should be directly correlated and complementary. 

Maslow’s pyramid of needs 

Abraham Maslow was an American psychologist best known for his “hierarchy of needs,” which he elaborated in his 1943 paper “A Theory of Human Motivation.” In his model, Maslow postulates that individuals are motivated by five different levels of needs:

The bottom four levels are also referred to as “deficiency needs” as they arise from a lack or deprivation of something, while the highest level of self-actualization is referred to as a “growth need,” something we aspire to.

Maslow discovered that even though all of these needs are present within us at all times, we might feel some more strongly than others. In fact, the most basic needs must be met – at least partially – before progressing on to higher level needs. For example, it is only when our basic needs for food and shelter are mostly met that we might orient our energy towards the more psychological needs of belonging and esteem. He also proposed that while every person has the potential to move up the hierarchy, this doesn’t always happen in a straight path. As we’ve all undeniably been experiencing lately, different life experiences will see us fluctuate between different levels of the pyramid. And the turmoil we are presently facing makes us all become much more driven again by deficiency needs – needs we thought we had well-covered.

We refocus on deficiency needs 

Despite this reorientation towards more basic needs, I dare to hope that we will be able to appreciate today, at its fair value, the enormous privilege we have in Luxembourg to be able to continue to have our physiological needs (food, water, air) met despite the crisis, thanks to the continued effort of farmers, truckers, delivery people, restaurant workers, storekeepers and cashiers who are going above and beyond.

But I also hope that we will know to be more sensitive to the magnitude of distress of all those people who are not as fortunate as us. In fact:

  • more than 90% of the world’s population live in areas with levels of air pollution that exceed the World Health Organization’s limits, and seven million people die from air pollution every year;
  • the French Observatory of Inequalities reports that 10% of the worldwide population, roughly 800 million people, are affected by malnutrition (insufficient intake of calories for a healthy life);
  • 2.1 billion people (more than 20% of the world population) lack, per United Nations statistics, access to drinking water – even though such access is officially considered a fundamental right. 

The second level

Our serenity with regard to the first level of physiological needs seems to fade as we progress to the second level, the safety needs (shelter, personal safety, job security, mental and, above all, physical health…). Until recently, safety, too, was a need we took for granted with all the public protection and support schemes in place (the right to housing, physical safeguard systems, social benefits and unemployment systems, social security, etc.), assets for which the main responsibility fell to the public authorities.

Yet here we are, suddenly realizing that these assets are no longer a sure thing and that, collectively and in full solidarity, we also have a crucial role to play in all of this. And that in the long run, even the protection systems we still have in place risk being overwhelmed. Concerns about housing, job and income security and, most of all, physical and mental health and well-being are destabilizing us while we continue to face the daily fear of an unknown future as we remain, for the time being, “sheltered in place.”

Again, assuming that we remain privileged and safe despite our confinement, I dare to hope that this will make us: 

  • truly assess the relatively favorable situation we are in compared to the 1.6 billion people — approximately 20% of the global population –who even before this crisis lacked adequate shelter and the 100 million homeless who have no shelter whatsoever;
  • truly realize the terrible and extreme confinement conditions of the 12% of the world population (of which 350 million are children) that currently lives in war zones; 
  • not forget the hundreds of millions of women who are confined at home for cultural and/or religious reasons… 
  • …or the victims of domestic violence whose safety is in complete jeopardy as they find themselves currently confined with their abusers. Sadly, the number and severity of such “intimate terror” have spiked in the conditions created by the pandemic. According to the National Coalition Against Domestic Violence (NCADV), nearly 20 people per minute are physically abused by an intimate partner in the United States alone;
  • really see the 30 million refugees who for reasons of war, drought, and famine are seeking nothing else than a minimum of safety. And why not even go a step further and open our doors to them in an effort of solidarity? Why not prompt our governments, our corporations and ourselves to do everything possible to help countries that are worse off than ours, where refugees will continue to flee from, now and in the future? Help them find local and effective solutions to the problems that are threatening their basic needs. As one of my best friends, Dr. Ravi Fernando, explains it: “Even if we reach the 2°C target, climate change will, according to the latest forecast, generate a flow of 143 million additional refugees between now and 2050 (more than 85% coming from Africa and South Asia). So we need to realize that unless we help them solve their problems locally, their problems will very soon become our problems, too.” So, better act proactively now than face an even bigger problem in a couple of years. 

The third level

So, with our physiological needs fully met and our safety needs at least partially met, one positive evolution that stands out is that we are more than ever realizing how deeply we carry the need for love and belonging within us. Surprisingly, the very technologies that we feared would ruin some deeper aspects of our family lives and friendships, have proven themselves to be beneficial, even essential, to uphold and further develop these very same relationships. This heightened sense of solidarity shouldn’t come as a surprise, however, as time and history have shown us over and over again that in times of crisis, people come together and collaboration and support become the drumbeats of everyday life. 

As we cherish these newfound connections to our families, let’s hold on to them as tightly as we can, realizing how lucky we still are while we take a moment to:

  • remember the more than 100,000 people we have already lost to this virus: grandmothers, grandfathers, mothers, fathers, sisters, brothers, children — people who, just like us, have families, many of which didn’t even get the chance to say goodbye to them;
  • think about all the families that are being broken up due to wars and immigration;
  • send our love to all the people who currently feel alone and isolated.

The fourth level

Even the esteem need, i.e. the esteem for oneself, the desire for reputation or respect from others, seems to be experiencing substantial shifts. As just mentioned, we certainly have rediscovered the real value of our family and close friends and repositioned them at the center of our lives. They are there when we really need them; they are the ones we appreciate and love unconditionally — those whose esteem and respect is worth a thousand times more than that of countless superficial friends on our social networks.

And I dare to hope that the real winners of this shift in perspective are our kids for whom, according to Maslow, this need of esteem and confidence is even more crucial. They now benefit from a greater attention and presence from their parents, despite the real difficulties that these cohabitations can pose in terms of maintaining our professional duties and their school activities. 

Over the last weeks, many people have had, by necessity, plenty of time for themselves. Some of us seem to try to seize this time as an opportunity: going for walks, resuming physical activity, reading, meditating, practicing self-care, rediscovering some of our passions and by doing so, experiencing some newfound sense of self-worth and esteem, maybe even finding some dignity in all of this. Yet, while for some lucky ones among us this new connection to self and others lets us indulge in a feeling of accomplishment and confidence, let’s not forget to honor the struggle of:

  • the 264 million people of all ages globally who suffer from depression and for whom this isolation has been punishing, exacerbating already existing psychological challenges;
  • the 284 million people in the world who have anxiety disorders;
  • the new people at risk of this same depression and anxiety and for whom this experience has been traumatic; 
  • People who lost their jobs.

Suicide hotline calls have spiked and some officials warn that this current crisis could prompt a second one — a mental health crisis. The longer this pandemic persists, the longer the confinement, the greater the economic toll, the graver the detriment to our mental health and the longer its effects.

I dare to hope that we will realize that our mental health is just as important as our physical health and start giving it the attention and resources it deserves.

The fifth level

The self-actualization need, i.e. the need to reach our fullest potential, seems to be on standby for now. Given the urgency and destabilization of our primary needs and, following the logic of Maslow’s theory, the desire to fulfill our personal potential is no longer our priority. The mad rush for more visibility and recognition has stalled. And maybe that’s for the best.  

In summary, the present turmoil is prompting us to refocus on our basic or, one might, existential needs. We are finally caring much more about our personal well-being and that of our loved ones – with an exemplary solidarity that we thought had disappeared – and much less on our “well-having,” which had as its major goal to impress others. Just comparing the messages and posts on social media that circulated before the crisis to the ones we read now makes it clear that “to be” has definitely taken priority over “to have.”

Let’s just hope that this will last.

As many people have stated in different ways: “People were created to be loved, goods are produced to be used.” I dare to hope that after this crisis we will finally stop doing the opposite. 

You will understand that it may soon be time to consider the utopia I dare to hope for as a real possibility and to recalibrate the importance of the roles of each person in our society with regards to our most basic needs. Applauding our helpers at 8 p.m. is a tremendous start, yet I dare to envision a standing ovation that lasts well into the future. 

(N.B. – Big thanks to you, Julie and Felix, for your support) 

5 Ways to Keep Everyone’s Morale High While Working from Home

It’s a challenge to be upbeat in these stressful and uncertain times. 

As businesses around the world scramble to implement emergency remote-working plans for staff, keeping company morale high is still more critical.

While preventing virus transmission is priority #1, making sure your people are feeling positive, energised and reassured comes close behind.

The point to convey: We must work still smarter than ever before.

Learn the five things you should do to keep employee morale high while working from home, in this recent article we wrote for our client,