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ESG: THE ‘EQUITY VACCINE’ DURING COVID-19 CRASH?

In the aftermath of the COVID-19 crash in March this year, many were quick to point towards the superior performance of ESG Stocks.

This post is issued by Osmosis (Holdings) Limited, a London based investment management group. For more information, please contact Lisa Harrison on 07716 912832 or [email protected]

ESG: The ‘equity vaccine’ during the COVID-19 induced market downturn?

In the aftermath of the COVID-19 crash in March this year, many were quick to point towards the superior performance of stocks that also had good Environmental, Social, Governance (ESG) profiles.


While we are strong advocates of sustainable and responsible corporate behaviour, one has to ask, was the enthusiasm about ESG as an ‘equity vaccine’ premature?


Summary

  • The academic literature on the performance of firms with good ESG profiles during the COVID-19 market turmoil is mixed.

  • ESG scores are not designed to identify investment opportunities, but rather to provide a holistic picture of firms as corporate citizens, making the identification of a link to financial performance difficult.

  • Osmosis’ Factor of Resource Efficiency was developed as an investment signal. After accounting for other drivers of stock returns, Resource Efficiency was rewarded during the period from February 17th 2020 to March 27th 2020 and acted as an independent driver of risk-adjusted excess returns (alpha)

 

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Global Investors (ex US). This report is issued in the UK by Osmosis Investment Management UK Limited (“Osmosis”). Osmosis is authorised and regulated by the Financial Conduct Authority “FCA” with FRN 765056. This document is a “financial promotion” within the scope of the rules of the FCA. In the United Kingdom, the issue or distribution of this document is being made only to and directed only at professional clients (as defined in the rules of the FCA) (“Professional Clients”). This document must not be acted or relied upon by persons who are not Professional Clients. Any investment or investment activity to which this document relates is available only to Professional Clients and will be engaged in only with Professional Clients.


This document is issued by Osmosis Investment Management US LLC (“Osmosis”). Osmosis Investment Management UK Limited (“Osmosis UK”) is an affiliate of Osmosis and has been operating the Osmosis Model of Resource Efficiency. Osmosis UK is regulated by the FCA. Osmosis and Osmosis UK are both wholly owned by Osmosis (Holdings) Limited (“OHL”).

IMPORTANT INFORMATION:

Global Investors (ex US and Australia). This document is issued in the UK by Osmosis Investment Management UK Limited (“Osmosis”). Osmosis is authorised and regulated by the Financial Conduct Authority “FCA” with FRN 765056. This document is a “financial promotion” within the scope of the rules of the FCA. In the United Kingdom, the issue or distribution of this document is being made only to and directed only at professional clients (as defined in the rules of the FCA) (“Professional Clients”). This document must not be acted or relied upon by persons who are not Professional Clients. Any investment or investment activity to which this document relates is available only to Professional Clients and will be engaged in only with Professional Clients.

US Investors. This document is issued by Osmosis Investment Management US LLC (“Osmosis”). Osmosis Investment Management UK Limited (“Osmosis UK”) is an affiliate of Osmosis and has been operating the Osmosis Model of Resource Efficiency. Osmosis UK is regulated by the FCA. Osmosis and Osmosis UK are both wholly owned by Osmosis (Holdings) Limited (“OHL”).

Australia Investors: This document is issued in Australia by Osmosis Investment Management (Australia) Pty Ltd (ABN 80 670 854 798, CAR No. 001305635) is a corporate authorised representative of Eminence Global Asset Management Pty Ltd which is the holder of an Australian Financial Services Licence (AFS Licence No. 305573). Osmosis Investment Management (Australia) Pty Ltd) is a member of the Osmosis group of companies, the parent company being Osmosis (Holdings) Limited a UK company headquartered in London.

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