MSCI finds ESG indices outperform broader indices
Responsible investment indices outperformed their non-responsible counterparts during the first quarter of the year, according to MSCI.
Looking at performance from 1 January -30 March, 2020, the index provider compared select MSCI ESG indices to the MSCI All Country World index (ACWI) and found all four outperformed.
It said a large part of their outperformance was due to a “systemic tilt” towards higher ESG-rated stocks.
Within global markets, emerging markets saw a stronger decline during the quarter than developed markets, with Europe faring the worst in developed markets.
MSCI described the market downturn caused by the COVID-19 pandemic, which began in mid-March, was the “first real-world test” for these ESG indices since the 2008 Global Financial Crisis.
“Although the current conditions have only existed for a few months, we observed a positive performance contribution from ESG across four select MSCI ESG indexes (representing tilt, optimisation and best-in-class selection approaches) and across some regions during Q1 2020.
“These results were consistent with long-term performance. As the coronavirus pandemic continues to test markets, we will continue to monitor how these ESG indexes perform.”
This was echoed by research by Morningstar which confirmed a majority of sustainable funds outperformed their traditional peers over multiple time horizons. This continued during the pandemic with sustainable funds seeing excess returns of 0.09% - 1.83% in the first quarter of 2020.
Commenting on the research, the Responsible Investment Association of Australasia (RIAA), said: “In addition to its devastating death toll, the COVID-19 pandemic has resulted in significant economic turmoil, having wide-ranging and severe impacts on many people’s livelihoods and financial markets globally. These include substantial stock market declines and many countries entering into a recession.
“Responsible investing, including the consideration of ESG factors such as these, helps investors identify a broad array of themes that are influencing markets and returns, and provides an important means for investors to navigate turbulent times; to avoid the most significant risks and to capture more opportunities.
AUTHOR
Laura Dew
Recommended for you
Betashares is to merge its managed account business with InvestSense to form a purpose-built option for financial advisers, forecasting a positive outlook for future industry growth.
With fund managers using ETFs as a way to reach the adviser market with a diversified product range, Betashares has shared how many ETFs were listed and closed during the first half of 2025.
Platinum Asset Management’s head of investment, Douglas Isles, has departed the fund manager after 12 years as the firm reshapes the business amid a merger with L1 Capital.
Investment consultancy Ascalon Capital has looked to research houses for hires, appointing one each from Zenith and Lonsec while Zenith has made an internal promotion.
