Sustainable Investment Insights - Quarterly Report: April 2023
Apr. 07, 2023 11:30 AM ET
FTSE Russell
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Summary
- Q1 saw a shift in leadership among SI strategies with 2022’s biggest underperformer, Environmental Opportunities, leading in Q1 (+6.6%), while the next worst in 2022, Global Choice and PAB, also performed strongly (+1.2%) and (+2.4%). The strongest performers in 2022, FTSE4Good and ESG Low Carbon, were the worst performers in Q1 (+0.5%) and (-1.3%).
- SI strategies are typically underweight Energy (particularly climate strategies) and have all been negatively correlated to oil over the past year, helping performance in Q1.
- Technology, in which all global and developed SI strategies are overweight, was positive across strategies, although some saw a negative selection effect. The largest positive impact from Technology was in the US.
- SI valuations are down from 2021 highs and below 5-year averages, except PAB. However, absolute P/Es have risen in the quarter and the premia over market are now above 5-year averages. Price to Book premia are at 5-year averages.
alphaspirit
Sustainable investment (SI) strategies broadly outperformed the market in Q1 2023. The strongest performance came from the green economy-focused Environmental Opportunities (EO) strategy, which was the biggest underperformer in 2022. Strategies which were underweight Energy, such as EU Paris Aligned Benchmark (PAB) and Global Choice, also outperformed as oil prices fell, while ESG and TPI strategies were at or slightly ahead of the market.
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