Sustainable funds are outperforming their peers during the pandemic, according to BNP Paribas

June 25, 2020

As the global Covid-19 pandemic emerged during the first quarter of 2020, many countries implemented strict measures that halted the economy, creating intense volatility in financial markets. Yet, according to Gabriel Wilson-Otto, Head of Stewardship Asia Pacific at BNP Paribas Asset Management, investors have been “doubling down” on sustainability over the last quarter, and sustainable funds have actually outperformed the broader market. Compared to other funds, portfolios for ESG (environmental, social and governance) showed strong outperformance across indices, such as the MSCI equity index and S&P 500, compared to other funds. He also noted that this was unlike historical precedents, where people shifted their focus away from sustainability to near-term profits during tough times.

According to Wilson-Otto, looking at ESG factors provides a broader view of risk and opportunity, providing better insights for investment decisions. He links sustainable business practices to actual business resilience. He also noted that besides investors, sustainability is also becoming an important factor that is influencing the workforce, adding that 40% of millennials in the US are choosing jobs based on their employers’ sustainability performance, and that anecdotal information also shows that consumers are shifting purchase decisions away from companies not looking after their workforces. In his words “…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”.

Wilson-Otto is one of the many who have paid close attention to and noted how companies with strong ESG credentials are faring during the pandemic. As Paul Polman former CEO, Unilever said, “The Covid-19 crisis represents an acid test for stakeholder capitalism.” So, has the pandemic slowed down sustainable investing? Data and market flows suggest otherwise. This sends a strong message to businesses and the investor community about how companies that embrace ESG are taking their stewardship responsibilities seriously, and immediately strengthening the resilience of their business by creating long-term value for their shareholders and society at large.