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How Has ESG Performed During The Pandemic? | The Corona Correction | Refinitiv - YouTube
Channel: Real Vision Finance
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Welcome to the Corona Correction series in
association with Refinitiv, I'm your host
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Roger Hirst.
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ESG investing, that's environmental, social
and governance, remains controversial for
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many, but it has been gathering momentum within
corporate management and institutional investing.
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But will corporate retrenchment due to the
Coronavirus outbreak put the ESG theme onto
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the backburner?
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I spoke with Refinitiv's Global Head of ESG
Proposition, Elena Philipova, to see how ESG
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styles have performed over the last couple
of months.
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Although what we're living through is a very
unfortunate disaster, I think it's creating
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and giving us a quite interesting opportunity
to test some ESG hypotheses.
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And those hypotheses are it's commonly believed
that ESG is a very good risk management factor
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and theme.
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So ESG products, companies, portfolios should
perform more stable during bear markets, should
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experience less volatility.
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So that's one thing we can test.
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And the other question is, are asset owners
asking for such products only when they can
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afford it in bull markets?
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And is the interest, is the volume of assets
allocated for sustainability products going
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to sustain or decrease?
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So we're only in the initial first couple
of months, but initial analysis using Refinitiv
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data seems very promising.
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It's providing very interesting and positive
insight.
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So I can give you a few examples.
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The majority of the ethical funds in our Lipper
database, have outperformed on their respective
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technical indicators, the peer groups that
they're part of, in the months of February
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and March.
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Which is a very positive signal.
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We also see the top 20 percent of the ESG
stocks outperforming the U.S. market in the
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recent sell off.
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And more importantly, this is also true when
we adjust for sector allocation.
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And one contributing factor to this is what
we're seeing is that ESG firms are having
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smaller EPS cuts than the ESG laggards.
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So the leaders are showing smaller EPS (Earnings
Per Share) cuts than the laggards.
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And in terms of asset allocation and capital
going torwards ESG products, what we've seen
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in the month of March is that ESG ETFs (Exchange
Traded Funds) are experiencing smaller outflows,
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as well as the year-to-date results are still
positive when compared to the massive outflow
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in equities that we've seen overall.
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So it looks very positive, but I guess I would
like also to challenge us a little bit and
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the conversation we're having, because it
illustrates the status quo, it illustrates
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the business world as we know it, as it exists
in the past.
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And right now that's what needs to change.
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The current business world is completely obsessed
with short term profits and performance.
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And we need to grasp this unique opportunity
to rethink and rebuild our conversations,
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the way we think about our investments and
the way we make decisions.
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As we celebrate the World Earth Day on April
22nd, it is really important to acknowledge
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and accept the fact that the pandemic crisis
we're living in right now, is contributed
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and is being influenced by the environmental
crisis that is upon us as well.
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So these two themes are very much interrelated
and interconnected.
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There is broad scientific consensus that things
like climate change, biodiversity loss, deforestation,
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are one of the main drivers of pandemic risks
that are upon human well-being and economic
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development.
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So the risk will continue to increase and
rise unless the recovery packages and investments
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and pacts that we put forward, and nations
around the world put forward to help societies
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recover from this pandemic are green.
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Green and resilient.
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Obviously, governments are presented with
very fundamental questions on how to allocate
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the limited public funds available in a socially
just and green way.
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But more importantly, it's the private funds
which have the biggest potential for positive
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impacts.
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And we all should be asking ourselves what
future do we want to finance?
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What future do we want to see ourselves and
our children and future generations living
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in?
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And make those conscious decisions.
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Early indications are that investors have
stayed engaged with the ESG theme throughout
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the period.
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And there has been some notable outperformance
against their key benchmarks.
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ESG allocations have remained sticky throughout
this period, displaying only small volumes
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of outflows, and if ESG themes are providing
some safety in this maelstrom, then it's worth
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investigating those opportunities regardless
of your persuasion towards this framework.
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We'll see you later with another update.
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