Investors have been “doubling down” on sustainability over the last quarter — and sustainable funds have actually outperformed the broader market, according to an analyst at BNP Paribas Asset Management.
That’s a departure from historical precedents where people shifted their focus from sustainability to near-term profits in tough times, Gabriel Wilson-Otto, head of stewardship, Asia Pacific at the French bank.
The first quarter of 2020 saw financial markets and economies in a tailspin as the coronavirus outbreak spread globally. Many countries, including the world’s major economies, entered lockdowns and implemented restrictive measures that halted economic activity.
Compared to other funds, sustainable funds — or portfolios for ESG (environmental, social and governance) — showed strong outperformance across indexes, such as the MSCI equity index and S&P 500, he told CNBC’s Capital Connection on Friday.
“In Asia ex-Japan, even with the deterioration in markets, ESG assets are actually up 21% in the first quarter, and this has also been supported by really strong performance from sustainable funds,” Wilson-Otto added.
… sustainable investing and ESG investing really is something that everyone should be considering simply because you can have profit and you can also have impact.
APAC head of stewardship, BNP Paribas Asset Management
“So in these challenging times, not only are we seeing inflows, but we’re seeing actual strong performance,” he said. “From my perspective, a lot of that is due to the link around sustainable business practices and actual business resilience, so we’re definitely seeing that come through in the data.”
Looking at ESG factors would also provide a broader view of risk and opportunity, which can in turn lead to better insights, investment decisions and better risk-adjusted returns, added Wilson-Otto.
“In this way, sustainable investing and ESG investing really is something that everyone should be considering simply because you can have profit and you can also have impact,” he said.
Spotlight on sustainability
Increasingly, a strong integration of sustainability practices have come to define whether industry leaders truly have a sustainable business, he said.
And many global investors are also focusing on capital strength, whether companies look after employees’ welfare and how they are shoring up business for long-term success, Wilson-Otto.said.
But besides investors, anecdotal data shows that consumers are also increasingly starting to put corporate behavior and boards under the spotlight — by potentially shifting consumption and purchase decisions away from companies not looking after their workforce, even though they are doing well, he added.
Additionally, sustainability is becoming an important factor that is influencing the workforce, he said, adding that 40% of millennials in the U.S. are choosing jobs based on their employers’ sustainability performance, compared to only 17% of baby boomers.
This generational change is also becoming a “more important driver of investment cash,” and businesses are trying to represent themselves in a way that is not only good for their employees and good for the world, but also good for their bottomline, he added.