Mr McLean says: “Investors must take to task boards that incentivise bad behaviour and companies that have behaved badly during the crisis. Some businesses have been much too quick to dump employees onto state support, when other adjustments might have been made.”
Data from Morningstar (see table) shows that sustainable equity funds have outperformed non-sustainable funds during the Covid-19 crisis.
Morningstar’s Hortense Bioy, director of passives and sustainability research, says: “The fact that sustainable funds on average held up better during the sell-off can be explained by a combination of factors.”
Firstly, being underweight in traditional fossil fuel industries, or airlines, will have helped ESG-aligned portfolios to avoid the significant losses incurred by these sectors in recent weeks.
She adds: “Traditional factors including quality, minimum volatility, and size would also have played a role. Companies that score high on ESG tend to be large well-run businesses that treat their stakeholders well, address their environmental challenges, enjoy more conservative balance sheets, and have lower levels of controversies. Many such companies tend to be more resilient during market downturns.”
David Thorpe is special projects editor at FTAdviser and Financial Adviser
