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Even in a Challenging Market, ESG Performance Has Remained Robust

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Think ESG is taking a back seat during this frenzy of Clorox buying and DIY hand sanitizer?

Investors may want to think again. According to Stacy Selig, co-head of Goldman Sachs Global Sales Strats and Structuring, you may be surprised to learn that ESG (Environmental, Social and Governance) as an area has been better performing and more resilient during this time. 

In this Daily Check In, Selig lays out for us how the major stock indices (S&P 500, NASDAQ, and the Dow) are helpful tools that allow investors to quickly assess what’s going on in the market. But... they also shouldn’t be misunderstood for what’s happening in the broader economy.

Selig notes that for investors wanting to understand what’s going on in both their own portfolios and the economy, “it’s a little bit like an iceberg. [You] have to look below the surface to get the entire picture.” And the indices are just the tip of the iceberg in this case.

Taking it a step further, she talks about how equity basket products (aka “baskets”), which track a set of related stocks, help uncover themes and can add color to what’s going on in an overall index. “They act like lasers, not like flood lamps.”

So icebergs and lasers can help reveal what sectors are doing well (sort of). It should come as no surprise that baskets of stay-at-home sectors – e.g., telehealth, ecommerce and videoconferencing – have been performing well.

On the other hand, ESG is a surprise. “Performance and inflows have been strong in a bullish market, but there had been a question about how those would perform in a more challenging market environment,” said Selig. But looking global ESG ETF inflows… 

  • 2019 brought $25 billion of new assets into the area, which was more than 4-5 times that of 2018
  • During this February alone, global ESG ETFs brought in more than $5 billion 
  • And during the market selloff period (part February, part March), we saw almost $10 billion in net inflows

“Our ESG baskets show a similar trend, and actually show that the performance has been quite robust and resilient during this period,” said Selig. “And most of that outperformance actually came during the selloff period, despite what was happening in the overall stock market.”

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