InvestNow News – 24th April – Morphic Performance Report – March 2020
Ethical Investing in Focus
Should ethical and ESG investing be discarded in a crisis? There is a school of thought that believes ethical investing is a “fair-weather friend”, a bull market luxury. That when markets turn investors discard their ethics to focus on returns. Bank Of America looked at this topic and concluded the opposite – it’s a bear market necessity. Firstly on performance, from the peak to the 25th of March, top ranked ESG outperformed the broader US market by 5%, even adjusting for them not owning oil stocks. In Europe the top 50 ESG stocks have outperformed by over 10%.
Looking at client flows, Ethical funds are tracking with inflows, despite record outflows in other equities. We’d conclude that an ethical framework is not just ‘nice to have’, it is ‘need to have’ for clients.
Portfolio review
The Fund fell 6.8% in March, outperforming global markets which fell 8.9% in AUD terms. Global equities fell 13.7% in USD terms, as the contagion effects from the Coronavirus drove share markets down. March was a once in a lifetime event that broke many records: part of the worst quarter on record for global equities; the second highest volatility in 90 years; and the biggest rebound. A falling Australian dollar versus the US dollar cushioned the losses for Australian clients.
Unusually, Japan was the best performing region (-8%, USD), whilst Asia Ex-Japan (-14%) was the worst. With the collapse in oil prices, energy stocks (-29%) and banks (-25%) were the worst performers, with health care (-4%) the best.