Trustnet Magazine 65 September 2020 | Page 22

Your portfolio 22 / 23 While fund managers fall over themselves in a bid to prove their ESG credentials, Cherry Reynard asks if this has created a buying opportunity in morally questionable areas of the market Sin city As the dust settles, investors have begun to focus on the brave new world likely to emerge from the pandemic: a world of agile working, technological advancement and clean energy. In the excitement over the potential for change, they have largely forgotten there is an older and murkier world that still exists: from airlines to tobacco to armaments. These unloved areas already trade on a discount, but in a world focused on ESG (environmental, social and governance) issues, can they bounce back? Two tribes The pandemic has polarised markets into the haves and have-nots. On the one hand, there are those companies that tick the boxes for sustainability, from future-proof technology stocks such as Zoom and Amazon to green energy providers. In contrast, areas such as oil and tobacco have grown unfashionable and investors have deserted them in droves. This is reflected in performance. Tom Becket, chief investment officer at Psigma Investment Management, says the performance of the Nasdaq versus the FTSE 100 is a crude proxy for this gap in valuations. The UK market is dominated by unloved sectors, which explains its recent relative weakness. While the Nasdaq is up 102.14 per cent over the past three years, the FTSE 100 is down 9.58 per cent. Areas such as oil and tobacco have grown unfashionable and investors have deserted them in droves TRUSTNET