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How Can COVID-19 Change Your Investment Objectives?

With the COVID-19 response still in its infancy, it’s too soon to say how thoroughly—and permanently—this global pandemic will change the way the world does business. For investors and plan sponsors who haven’t yet fully committed to socially-responsible investment principles, now may seem like an inopportune time. After all, with companies throughout the world facing labor shortages, supply chain disruptions, and liquidity problems, isn’t now the time to play it safe?

However, these sustainability principles can make socially-responsible investments an appropriate option in the post-COVID world. Learn more about how making slight tweaks to your investment portfolio can help support better worker treatment, regulatory compliance, and healthy supply chains.

Good Worker Treatment Strengthens Supply Chains

Some of the businesses that have been hardest-hit by the COVID-19 crisis are those whose supply chains depend on low-paid workers who must work in far closer quarters than recommended through social distancing guidelines—feedlots, meat processing plants, and agricultural fields. Not only can these working conditions make it easy to spread COVID-19, but they can also increase the probability of major supply chain disruptions when workers fall ill or simply stop coming into work.

These disruptions can have a ripple effect on the local economy. The more COVID-19-positive patients encountered by healthcare workers regularly, the higher the likelihood that these healthcare workers will contract the virus and either spread it to others or step back from treating patients for at least two weeks. For investors, increasing the health of supply chains depends on improving the treatment of the workers who make up these chains.

Regulatory Compliance is Good Governance

Another area in which socially-responsible investment goals can dovetail nicely with value investing lies in regulatory compliance. Many corporations are failing to abide by current forced labor and human rights regulations, which can put them at risk of hefty fines and fees (and, in some cases, even jail time for the highest-ranking corporate officers). Not only can regulatory compliance help avoid these fees, but it can also help reduce the rapid spread of COVID-19.

Weak Supply Chains Will Be Weeded Out

If the COVID-19 pandemic has taught businesses anything, it’s the importance of a healthy supply chain. With food rotting in fields and farmers euthanizing livestock because there are no workers to process these products, supply chain disruptions can have significant impacts on an already-struggling society. Going forward, businesses may exercise greater caution in creating and preserving their supply chains to help protect against these black swan events.

For example, “just in time” manufacturing is intended to improve efficiency by eliminating the need to store tons of product that may not sell for a while. However, this method doesn’t leave much room for error, and a delay in shipping can create a ripple effect that leaves you playing catchup for weeks. Suppliers and supply methods that are unreliable in an emergency may not survive the pandemic without making some major changes.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Please keep in mind, the return on values based investments may be lower than if you make decisions based solely on investment considerations.





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