ESG funds outperform Paris stock exchange: research

Axylia, a Paris-based business consultancy, has published research that shows the performance of ESG funds on the CAC 40, the French stock market index, significantly outperformed those with lower ESG profiles, and were also lower risk.

The researchers found that the performance of ESG leaders, with the best ESG ratings, is 10% higher than that of the worst ESG profiles. Furthermore, the risk was found to be lower for companies with the best ESG profiles. These leading ESG companies had an average volatility 4% lower on the CAC 40).

In reviewing the performance of stocks on the CAC 40, a benchmark index on the Paris stock market (Euronext), Axylia found the companies with the best ESG ratings are more resistant to the stock market correction and are less volatile, especially since their rating is classified as "good."

There are still large disparities within each class of notes which encourage further individual and detailed analysis of the companies.

The company said it is clear that investors are "embracing the sustainability thesis and therefore the ability of the companies that are paying attention to it to weather the crisis and seize the opportunities as soon as economic activity resumes."

In the process, Axylia found, they integrate the ESG rating, the first tool available to them to identify and invest in these sustainable companies.

The covid-19 crisis would mark the start of a virtuous spiral: investors subscribe to the thesis of sustainability and then direct their capital towards sustainable companies identified as such by the ESG rating, the first tool available to them in this field.

These buyer flows raise prices and install the outperformance of the highest-rated companies. Thus, the covid-19 crisis marks the de facto advent of responsible finance as an

instrument for protecting investments," Auriac concluded.

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