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[ SUSTAINABILITY]
The evidence in favour of ESG investing as a driver of
returns is now irrefutable, says Rebecca Jones. Here
she explains why
The greater good
O
ver the past half-decade,
numerous studies have
emerged showing that
funds, indices and
companies that pay attention to and
take positive action on environmental,
social and governance (ESG) factors
outperform those that don’t.
Reports from Morgan Stanley and
Morningstar show sustainable funds
consistently match and often beat the
returns of main market competitors;
other studies from MSCI and
BlackRock indicate ESG indices also
have an edge. Meanwhile, academic
papers from Oxford University and
Harvard conclude companies that
pay attention to ESG are rewarded by
stronger and less volatile share prices.
The evidence is becoming undeniable.
“There is now a huge body of
evidence that shows how ESG
outperforms,” says Edward Lees,
fund manager at BNP Paribas. “The
TRUSTNET
‘E’ part in particular is now giving a
clear alpha signal, particularly since
2009. Meta studies increasingly
show 3 to 5 per cent outperformance
as areas like solar have got more
competitive.”
Future-proofing
While the performance benefits are
clear, this rush to sustainability is
now being driven predominantly
by risk management. When NEST
announced its intention to divest
from tobacco in August, it claimed
While the performance
benefits are clear, this rush
to sustainability is now
being driven predominantly
by risk management
trustnet.com