The ESG Advisor
Published in

The ESG Advisor

End of Week Notes

ESG and the pandemic: latest research

Sustainable funds didn’t outperform but they held up well enough in April’s bounce

Source: New York Times, Bureau of Labor Statistics

Sustainable funds hold their own in April

In any event, on to a more prosaic topic. I’ve been following the performance of sustainable funds during the downturn. These funds outperformed during the first quarter, evidenced by their over-representation in the top halves and top quartiles of their Morningstar categories. The returns of 70% of sustainable equity funds finished in the top half of their category for the quarter. The returns of 44% of sustainable equity funds finished in the top quartile while those of only 11% finished in the bottom quartile.

Source: Morningstar Direct

MSCI: ESG stock tilts powered ESG indices’ outperformance in Q1

The other component of my first-quarter review of sustainable funds was an evaluation of ESG index returns. I found that 24 of 26 turned in less negative returns than the conventional indexes to which they are most similar in terms of market coverage. Based on attribution analysis, the biggest reason was what I called ESG stock selection, the tilt in these portfolios toward companies with better ESG assessments and ratings. (Energy underweights were secondary.)

  • MSCI ACWI ESG Universal
  • MSCI ACWI ESG Leaders

Research: Companies valuing stakeholders during pandemic had higher institutional flows and less negative returns

I wrote a couple weeks ago that corporations have no choice but to prioritize their stakeholders given the gravity of this crisis. But the standard view of shareholder-focused management suggests that cutting costs is the necessary response required so the company can protect shareholders and live to fight another day. Investors, in this view, might be expected to punish companies that prioritize stakeholders rather than cut costs.

Coming this week: Morningstar Sustainable Investing Quarterly Webinar, Thursday, May 7th, 10 a.m. CT

Register here



Incorporating sustainability and impact into your investments

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Jon Hale

Global Head, Sustainable Investing Research, Morningstar. Views expressed here may not reflect those of Morningstar Research Services LLC. or its affilliates.