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Many ESG indexes held up better through the downturn than their broad-market counterparts. REUTERS/Lucas Jackson/File PhotoLucas Jackson/Reuters

Just a few months ago, it seemed as if the fight against climate change had built some real momentum. But now, with the novel coronavirus bringing global commerce to a screeching halt, sustainability is feeling like an unaffordable luxury for some cash-strapped companies.

“I suspect an awful lot of the environmental agenda and targets will be put on the back burner for a number of years,” said Michael O’Leary, chief executive of Ryanair DAV, the Irish airline carrier, at an event hosted by the Financial Times this week. “[That is] not because we all care less about the environment. I think the much greater political issue is going to be massive unemployment across Europe [and] massive government indebtedness.”

With companies in danger of going under entirely, it seems reasonable to wonder how much executives will worry about renewable energy or planting trees.

Yet, Mr. O’Leary’s assertion may be misguided. For starters, the European Union is looking to make emissions cuts a prerequisite for any bailout of airlines. It has also shown no indication that it will retreat from its wider climate ambitions.

Meanwhile, investors are also still going all in on environmental, social and governance themes (ESG) – and so far their bets have paid off. If anything, the pandemic has only reinforced fund managers’ belief that ESG is worth worrying about.

Sustainability-themed funds saw record inflows in the U.S. in the first quarter while the rest of the market saw hundreds of billions of dollars of outflows, according to data provider Morningstar Inc. On top of that, many ESG indexes held up better through the downturn than their broad-market counterparts.

“Talking to clients across the board, the reasons they want to integrate ESG have been supported and amplified by the crisis,” says Ted Eliopoulos, co-chair of the sustainable investing council at Morgan Stanley Investment Management Inc. “The intensity in interest has also increased.”

Many investors see parallels between the climate crisis and the COVID-19 crisis.

“There is no question this was a negative shock brought to you by nature,” says Hugh Lawson, head of institutional client strategy and ESG and impact strategy at Goldman Sachs Asset Management LP.

For Mr. Eliopoulos, screening for companies with high ESG scores is simply a way to find good executive teams. He argues that companies that consider environmental and social factors – and abide by good standards of corporate governance – should be better equipped to ride out a downturn and get back up to speed quickly.

As such, the COVID-19 crisis will serve as a good “laboratory” to test the theories underpinning ESG investing, he says. “We’ll see [which companies] were able to anticipate, mitigate and manage through this crisis better or worse.”

Investors have not let up on their efforts to push companies to be more responsible. Two out of every three proposals from shareholders submitted for annual meetings this year address environmental or social matters, according to Nuveen, a Chicago-based asset manager.

To be sure, many of those proposals were filed long before the pandemic, but there has also been no sign that activist investors are willing to let them drop by the wayside.

Just this week, Legal & General Investment Management, the largest asset manager in Britain, announced it would vote against the board chair of ExxonMobil Corp. because of the company’s “lack of strategic ambition around climate change.” Climate-conscious shareholders also racked up a victory earlier this month when JPMorgan Chase & Co. announced it would demote Lee Raymond, former chief of ExxonMobil, from his position as lead independent director.

It’s also clear that many companies do not see matters of sustainability as a serious burden, even in the grip of the pandemic. In the U.S., a group of more than 300 companies, including Microsoft Corp., Capital One Financial Corp. and Mars Inc. called on the federal government to pass a carbon tax and to put green projects at the heart of its coronavirus recovery plans this week.

Even within the aviation sector, there’s still a push toward decarbonization. Airlines for America, a trade group representing most of the largest carriers in the U.S., announced this week the approval of a new blend of sustainable aviation fuel.

Despite all of this, could Mr. O’Leary still be right? Of course – mounting bankruptcies and unemployment could easily make governments, companies and investors prioritize growth by any means necessary.

There will be some tough decisions made over the next six months as companies fight for survival, says Mr. Eliopoulos. But he argues that sustainability is a long-term play.

Nothing about the coronavirus crisis will dislodge the “secular trend” of companies taking sustainability seriously, agreed James Rich, senior portfolio manager at Aegon Asset Management in Chicago. The link between sustainability and index-beating returns is clear, he says. “If anything it has probably put a period at the end of that sentence.”

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