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COVID-19 Crisis: ESG Outperforms - will it last?

A Flash in the Pan or Something more 'Sustainable'?

It is very early days, but there is some evidence that stocks with high ESG scores appear to have outperformed the wider market by a sizeable margin both during the recent downturn and over longer time periods too. Whether this outperformance persists during the economic recovery phase from COVID-19 is perhaps up for debate, but it appears likely that governments are more likely to direct future expenditure towards some of the areas that tend to feature prominently in ESG portfolios, such as healthcare provision and pharmaceuticals.

One noticeable effect during the COVID-19 global lockdown has been the decrease in environmental emissions; the death toll from air pollution is estimated by the WHO at some 7 million annually, which perhaps puts COVID-19 into some context. It remains to be seen whether climate risk remains at the top of the agenda as the world attempts to restart industrial output to recover from the highly negative economic effects of the COVID-19 pandemic.

 

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FEATURED PAPERS


Making sustainable investing count (Robeco, 2020)

Robeco's thought-provoking 72-page publication covers many aspects of sustainable investing and illustrates why they were recently ranked first for sustainable investing in a survey of 75 asset managers conducted by Share Action.

Sovereign debt investing – A dynamic ESG model (Manulife IM, 2020)

For compliance reasons, this paper is only accessible in certain geographies

Manulife IM explore a model-driven approach to benchmarking sovereign sustainability across each of the E, S and G factors.


ESG OUTPERFORMANCE


ESG implications of the COVID-19 pandemic (BMO GAM, Mar 2020)

BMO GAM considers the ESG implications of the COVID-19 pandemic, suggesting that it has the potential to affect many aspects of ESG investing, including public health spending, as well as company reaction to sustainability issues.

How Covid-19 could shape the ESG landscape for years to come (DWS AM, Apr 2020)

For compliance reasons, this paper is only accessible in the United Kingdom

DWS AM questions how the COVID-19 pandemic might impact the ESG landscape.

Aggregate Confusion: The divergence of ESG ratings (2019)

This paper investigates the divergence of environmental, social, and governance (ESG) ratings between the major ratings agencies, and at a granular level, discovers the differences between them.

Podcast: Having it all - the long-term turtle and the short-term hare (Candriam, Apr 2020)

For compliance reasons, this paper is only accessible in the UK & Europe

In this podcast Candriam highlights recent analysis from BofA that reveals that stocks with strong ESG scores outperformed the market by several percentage points and illustrate their own approach to ESG investing.

How Have ESG Objectives Behaved During This Year’s Market Turbulence? (Invesco Europe, Apr 2020)

For compliance reasons, this paper is only accessible in certain geographies

Invesco investigates the recent performance of stocks with high ESG scores and finds that E, S and G factors may lead to outperformance.

Quantifying ESG fund performance (MSCI, Apr 2020)

MSCI analyze top ESG funds to understand better the contribution of the ESG factor to their performance.


IMPACT INVESTING


Quantifying impact: measuring and managing effects on people and the planet (Nuveen, Mar 2020)

Nuveen highlights impact investing; a form of ESG investing with social and/or environmental goals and objectives that are also quantifiable, alongside traditional financial returns.

Making an impact by making better investment decisions (NN IP, 2020)

Jeroen Bos, Head of Specialised Equity & Responsible Investing at NN Investment Partners, discusses the different ways investors can improve returns and have a positive impact on the world.


OTHER ESG PAPERS


Incorporation of ESG Norms in Investment Management (Scientific Beta, 2020)

Scientific Beta's paper discusses the Enhanced ESG analytics that are available on the Scientific Beta platform and illustrates how to use these to assess index-based investments against ESG standards.

DAX 50 ESG - The new standard in German ESG investing (Qontigo, 2020)

Qontigo investigates the make-up of the DAX 50 ESG Index, its exclusion screening and the ESG credentials of the companies that are index constituents.

Webinar: Climate leaders in the investment community (UBS AM, 2020)

In this Reuters Events collaborative webinar, speakers from Oliver Wyman and UBS AM discuss the financial materiality of environmental factors during the climate emergency.

The Sovereign Transition to Sustainability: Understanding the dependence of sovereign debt on nature (LSE, 2020)

This LSE paper investigates how the 2030 deadline for the achievement of Sustainable Development Goals and the Paris Agreement target has profound implications for both corporates and sovereign debt issuers too.

Climate Change and Credit Risk (EDHEC Institute, 2020)

EDHEC investigate the relationship between exposure to climate change and corporate credit risk and find that the exposure to climate risks affects the creditworthiness of loans and bonds issued by corporates.

The Private Markets Have Reached an Inflection Point in ESG (Capital Dynamics, 2019)

Capital Dynamics suggests that ESG has reached an inflection point in private markets, becoming a necessary condition rather than being an attractive option to offer clients.

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