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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