According to newly published research from Fidelity International, on the way down in the fastest bear market in US capital markets history – a decline of 27% hit over a period of 36 days, between February 19 and March 23, in the S&P 500 – equity and fixed income securities issued by companies at the top of Fidelity’s sustainability rating scale dropped less than the index while those at the bottom exceeded its decline.
The equity of companies rated A or B on the ESG in the company’s proprietary sustainability scoring model performed on average 3.8% better than the S&P during the market rout, while those rated C to E performed 7.4% worse.
“No asset was spared as the severity of the economic shutdown needed to contain the coronavirus outbreak became apparent to investors. The quickest US bear market in history, from February to March this year, was also the first broad-based market crash of the sustainable investing era,” says Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International.
“Our thesis, when starting the research, was that the companies with good sustainability characteristics have better management teams and so should outperform the market, even in a crisis. The data that came back supported this view.”
Meanwhile the same ESG-outperformance phenomenon was witnessed in the fixed income secondary markets, where from the start of the year to March 23, bonds issued by companies with high ESG scores outperformed their lower rated peers returning -9.23% on average for those rated A, versus a -13.2% return for bonds issued by B-rated companies and -17.14% for those rated C.
https://esg.theasset.com/ESG/40257/esg-proves-its-resilience-in-the-fastest-bear-market-in-history
