In the world of investments, a trend that has become stronger since the outbreak is the increase of inflows into Environmental, Social and Governance (ESG) focused funds and companies.
We have now entered a brave new world. Choppy, unprecedented waters. A world that is expected to be somewhat, if not significantly different from the world we inhabited before January, or February 2020. In this unknown territory, making big decisions is a challenge. Deciding where to invest is one of them. In the world of investments, a trend that has become stronger since the outbreak is the increase of inflows into ESG focused funds and companies. ESG means using Environmental, Social and Governance factors to determine an investment decision. In the book titled “Invest For Good”, published way before the pandemic, in July 2019, famed investor and one of the authors, Mark Mobius, highlighted that ESG investing was one of the two main changes destabilising the status quo for professional investors (for the curious, the second factor mentioned in the book was passive investing). Recent data suggests that this change has become much more pronounced since the COVID-19 outbreak. Investor research and data company Morningstar highlighted that in the first quarter of 2020, two-thirds of sustainable funds performed better when compared to the average of all types of funds, sustainable and non-sustainable. Another, more recent report by Morningstar, released on 15th June, highlighted the resilience of ESG investing in volatile times. The report found that in the past 1, 3 and 5 years, ESG stocks and fund strategies lost less money and were less volatile than their non-ESG counterparts. Furthermore, a recent report by BlackRock highlighted that “in the first quarter of 2020, we have observed better risk-adjusted performance across sustainable products globally, with 94% of a globally-representative selection of widely-analyzed sustainable indices outperforming their parent benchmarks”. Finally, a Financial Times article pointed towards MSCI data which showed that corporate bonds and equities with high ESG ratings outperformed the index recently.