In this article:

A strong relationship between sustainability and market performance

Our hypothesis, when starting the research, was that the companies with good sustainability characteristics have more prudent and conservative management teams and will therefore demonstrate greater resilience in a market crisis. 

The data that came back supported this view. In Outrunning a crisis, we find a strong positive correlation existed between a company’s relative market performance and its ESG rating over this turbulent period. The equity and fixed income securities issued by companies at the top of our ESG rating scale (A and B) on average outperformed those with average (C) and weaker ratings (D and E) in this short period, with a remarkably strong linear relationship. 

While some caveats remain, including adjustments for beta, credit quality and the sudden market recovery, we are encouraged by evidence of an overall relationship between strong sustainability factors and returns, lending further credence to the importance of analysing ESG factors as part of a fundamental research approach. 

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Jenn-Hui Tan

Jenn-Hui Tan

Benjamin Moshinsky

Benjamin Moshinsky