Socially responsible investing (SRI) can achieve longer term outperformance when markets are in turmoil, a study has claimed.
The research – carried out by investment platform Charles Stanley Direct – shows that investors are significantly more likely to generate outperformance over the past three, five and 10 years from ethical or sustainable funds rather than from standard funds.
This latest report hailing the pros of ESG-style investments, highlighted that: “It’s often assumed that socially responsible investing means sacrificing performance”, but this was found not to be the case.
According to Rob Morgan, investment analyst at Charles Stanley Direct, the evidence is clear that doubts over underperformance of SRI are misplaced.
“Recent market action appears to underscore the case for backing companies with strong ESG credentials, and fund managers are increasingly integrating some form of ESG research into their processes – even though it may not always be identified as a separate strand,” he said.
“Some do certainly place more emphasis on it than others, but in the case of funds labelled ‘ethical’ or ‘sustainable’, it should be central to the stock selection methodology. This enables us to compare the returns from these funds to their respective industry averages,” he added.
A separate study undertaken earlier in April by Fidelity International also concluded that company performance and ESG ratings have been positively correlated during the market volatility caused by the covid-19 pandemic.
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