July 9, 2020

COVID-19 and Our Increasing Demand for Tech: Implications for Sustainable Investing

Below is an excerpt from ISS ESG’s recently released “COVID-19 and Our Increasing Demand for Tech: Implications for Sustainable Investing.” The full paper is available for download here.

There has been a significant growth in the use of technology products in different parts of life as societies across the globe respond to the threat of the spreading virus. Working from home and the surge in the use of online collaboration tools have enabled workers in many industries to continue to do their jobs. Platforms to learn and teach online have kept teachers in contact with students. While cash-less pay has been the norm in some countries for quite some time now, the pandemic was the final nudge to encourage those in other countries to make the switch to online payments in order to prevent the spread of the virus.Social distancing has increased our interactions on social media and healthcare workers have started to rely on technology to communicate with patients who cannot come in for regularly scheduled check-ups, or even use technology to track COVID-19 cases.

Thus, some solutions and services provided by the software and information technology industry are now more valuable for daily life than ever. At the same time, the sector’s key ESG risks related to information security and data privacy are moving into the spotlight, exposing companies to an unprecedented degree of scrutiny. Data privacy and information security are considered key topics in the ISS ESG Corporate Rating. An analysis of ISS ESG data can therefore provide valuable insights for investors. ISS ESG data indicates the heightened awareness of tech companies for these ESG risks, but also exposes gaps in comprehensive mitigation.

In addition, the tech sector has experienced a strong outperformance in the stock market so far this year. The ISS Economic Value Added (EVA) framework provides investors with an additional layer of analysis for informed investment decision making. ISS ESG’s EVA analysis indicates that tech companies are generally very high Quality, but also have a relatively higher level of Valuation.

By Antonia Goeser, Julia Wißmeyer, Gavin Thomson, Philline Managuelod; ISS ESG

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