Despite concerns over the coronavirus outbreak, the stock market continues to move higher. Fueling optimism is stronger than expected quarterly results from many industry leaders. Apple (NSDQ: AAPL), the world's valuable public company, reported record results for revenue and earnings despite the ongoing trade war with China. However, investors may be underestimating the impact the virus could have on future quarterly earnings results. China's economy is second in size only to that of the United States. Already, some analysts are predicting a drop of at least 1% in China's gross domestic product (GDP) this year due to the virus. Read This Story: Pathogens and Profits: Coronavirus Takes Its Toll If those predictions prove true, a stock market correction is likely. When that happens, some companies will suffer more than others. A corporate CEO doesn't want to give shareholders an excuse to dump his company's stock, instead of dumping his competitor's. For that reason, many companies are going out of their way to embrace an old idea that is rapidly gaining new credence on Wall Street. Socially Responsible It wasn't that long ago that the concept of "socially responsible investing" was viewed by Wall Street as an inefficient means of building wealth. The industries excluded included alcohol, tobacco, and firearms, some of the most profitable businesses during the second half of the twentieth century. Many portfolio managers regarded socially responsible investing as akin to fighting with one arm tied behind their backs and rejected it for that reason. Over time, socially responsible investing evolved to be known as ESG, which stands for environmental, social, and governance. Instead of excluding specific industries or sectors, it focuses on policy objectives such as reducing air and water pollution, promoting equal employment, and mandating ethical business practices. Rather than aiming at harmful products, the ESG movement is an attempt to modify harmful behaviors across all sectors of the economy. Until recently, most companies only paid lip service to ESG objectives since their shareholders and board members were primarily interested in maximizing their return on investment. But over the past few months, ESG has moved to the forefront of shareholder interests and is rapidly being adopted by companies in all industries. As Good as Gold In January, BlackRock (NYSE: BLK) CEO Larry Fink identified climate change in a letter to shareholders as a priority for his fund managers that collectively control over $7 trillion of assets. Fink's message is clear: ESG is an important consideration that weighs heavily in the valuation of all businesses. For that reason, companies in sectors not traditionally associated with socially responsible investing are addressing it head-on. On February 12, Canadian miner Barrick Gold (NYSE: GOLD) released Q4 and full-year results that included this statement from the company's CEO: |
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