ESG stocks outperform Paris stock exchange: research
Axylia, a Paris-based business consultancy, has published research that shows the performance of ESG stocks on the CAC 40, the French stock market index, significantly outperformed those with lower ESG profiles, and with 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."
In the process, Axylia found, investors 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 inflows 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.
Vincent Auriac, president of Axylia, said "Axylia adds a contribution to the debate on SRI and its performance. The covid-19 crisis marks the start of a virtuous spiral that makes SRI a formidable risk management tool that provides new opportunities for investment. Our longstanding SRI research and our commitment is set to intensify further.
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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