Asset management, private equity, investment property and infrastructure players: discover our ESG press review! Read our monthly selection of articles from the national and international press!
ESG funds outperformed during the Covid-19 crisis, says ESMA study
At the end of February, the European Securities and Markets Authority (ESMA) published a study, reported by the Financial Times (article), showing that actively managed ESG funds outperformed ‘non-ESG’ funds on average during the Covid-19 crisis. The study was based on market data from mid-February to the end of June 2020. The outperformance was particularly strong during the first 10 weeks of the Covid-19 crisis, when markets plummeted. The study highlights not only the value of the ESG approach, but also the value of active management, which outperformed passive management. The study covered 2581 UCITS domiciled in Europe.
Is ESG on the way out in the US?
In February, the question was the subject of much debate across the Atlantic. On 29 February, the Financial Times devoted a podcast to the question “Is ESG over? An interesting opportunity to explain the reasons behind the current “anti-ESG frenzy” in the United States. A viewpoint also developed by the Wall Street Journal in an article entitled “Forget the term ‘ESG’, but don’t ignore the power of the concept” (read it here). The Wall Street Journal based its article on a study which found that the 50 companies with the best stock market performance between 2018 and 2023 were also companies with a strong record of social responsibility. This underlines the continuing relevance of ESG analysis in identifying tomorrow’s best-performing companies.
Overhaul of SFDR regulation: the AMF advocates a 4-category solution
At the end of 2023, the European Commission launched a wide-ranging consultation to consider an overhaul of SFDR regulation and its now famous “Article 6”, “Article 8” and “Article 9” categories. On 21 February, the AMF announced its recommendations (article). In particular, the regulator recommends scrapping categories 8 and 9 and opting instead for the following four categories:
- “Environmental solutions”: funds investing in the most environmentally virtuous companies, with exclusion criteria
- “Social Solutions”: funds focusing on social criteria
- “Climate transition”: funds invested in companies in the process of transitioning to a low-carbon economy
- “Non-financial filters”: a “general” category involving consideration of the three criteria E, S and G simultaneously, leading to a reduction of at least 30% in the investable universe, or defining a choice of securities whose average ESG rating will be 30% higher than the market average.
A fifth category, “Biodiversity Transition”, is being considered. It should be noted that the “Environmental Solutions” category would be close to the Greenfin label, and that the “Non-Financial Filters” category would be close to the SRI label.
ESG bond issues off to a flying start this year
Since the start of the year, issuance of ESG bonds (Green Bonds, Social Bonds, Sustainability Bonds and SLBs) has reached record levels. In mid-February, on the euro Investment Grade market, 39% of the amounts issued were ESG bonds (i.e. €18 billion), compared with 20% in 2023. This represents a near doubling of the “market share” of ESG bonds at the start of the year, dominated by Green Bond issues. In the euro High Yield segment, ESG issues have accounted for 25% of issuance since the start of the year, or €9.5 billion. It should be noted that the same phenomenon was observed in the United States, with a 50% increase in amounts issued in the form of green bonds in January 2024 compared with January 2023 (article).
