ESG Funds Outperformed During March COVID19 Sell-Off


Stockholm (NordSIP) – According to an analysis of the performance of equity funds conducted by Morningstar, two-thirds of sustainable funds outperformed their average peers during the March sell-off, as COVID19 fear took over the market.

As the investment research provider notes, the COVID19 pandemic is the first real-time financial crisis since the widespread investment in sustainable funds became a trend, providing a real-world test of the performance of these assets.

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One common trend of the outperformance appears to be the exposure of sustainable funds to the healthcare sector, which has become increasingly the focus of the market’s hopes for economic recovery through a vaccine. The Trojan Ethical Income Fund and RobecoSAM Sustainable Healthy Living Fund are among the top two best performing sustainable funds. According to Morningstar, companies operating in the healthcare sector such as Roche, Colgate Palmolive, Assura, Gilead Sciences and Novo Nordisk were the main drivers for the outperformance of these funds.

Other ESG stocks that outperformed the market benefited from people isolating and staying at home. Pictet Nutrition benefited from a rise in food stocks, while Pictet Security gained from the increased use of internet services due to remote working arrangements.

Morningstars market review was careful to highlight that some funds did not outperform the market. Only a majority did. Indeed, funds invested in transportation and real estate do appear to have suffered as was the case of Kempen Global Small-Cap, LO Fund Generation Global or MS INVF Global Property.

Image © Novo Nordisk
(Biopharm production, Gentofte, DK: Laboratory technician working in Quality Control.)

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The coronavirus epidemic has further accelerated the rise of ESG into the investment mainstream. As deficits skyrocket, bond investors have an opportunity to engage with governments on climate change, argues Thomas Dillon, Senior Macro ESG Analyst at Aviva Investors.

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