Fidelity Emerging Asia Fund’s Dhananjay Phadnis says a focus on sustainability could help identify Asia’s long-term winners.
The Covid-19 crisis has provided Asian companies with a unique opportunity to look beyond the narrow focus of how to meet this year's financial targets. As a long-term investor, I've been encouraged that an increasing number of companies are clearly using this crisis as an opportunity to protect and enhance the long-term value of their businesses. This is in sharp contrast to the market's traditional focus on short-term earnings.
Author Alex Edmans, in his book titled ‘Grow the Pie: How Great Companies Deliver Both Purpose and Profits', argued that companies that adopt a pie-growing mindset - aiming to improve value for all stakeholders rather than putting one ahead at the expense of the other - will be the companies that can deliver sustained value creation.
In that sense, while it may seem like shareholders have been at the receiving end of the crisis-related pain through earnings cuts, lower dividends and reduced share buybacks, the reality could be that many companies will be able to enhance stakeholder value by cushioning the impact for at least some of them during this crisis. We have been able to map this transformation of corporate purpose through a post-crisis survey of more than 140 of our analysts worldwide.
Over half of the responses indicated an increase in company plans to step up focus on workers, consumers and the wider community as a result of the pandemic. Notably, for our analysts based in Asia this figure was over 60%.
At a company level, we've seen several examples of this long-term approach over recent months, in sectors as diverse as dairy products producers, banking, sportswear, and healthcare.
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