The COVID crisis has drawn attention to many ESG themes
- Social and Governance issues of immediate concern during the crisis include employee practices and cybersecurity.
- Longer-term themes include societal inequality and regulatory appetite to intervene with respect to non-financial risks (now COVID, next climate?).
Poor ESG practices have been associated with weaker performance
- We’ve seen meaningful differences in returns between best- and worst-scoring companies based on Environmental and Social criteria (top chart).
- Relative valuations of highly rated ESG companies have expanded during the current crisis (bottom chart). Such firms tend to have lower betas and more attractive quality characteristics.1
Acadian’s approach to ESG investing remains robust
- Our proprietary ESG signals have performed materially better than widely available generic factors.
- Our strategies have lower carbon footprints than their benchmarks, by roughly 50% and 30% in Developed and Emerging Markets, respectively.
- The crisis hasn’t slowed our corporate engagement activities. We completed more than 1600 in Q1.
ESG factors have been relevant in the crisis
The ESG “value spread” has expanded
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