Outrunning a crisis: Sustainability and market outperformance

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The recent period of market volatility as a result of the coronavirus pandemic has shocked in its severity. But the broad-based sell-off did discriminate, as new data from Fidelity International reveals. Each additional level (from A - E) of Fidelity’s proprietary environmental, social and governance (ESG) ratings was worth 2.8 percentage points of stock performance versus the index during recent volatility, according to the research.

Fidelity carried out a performance comparison across more than 2,600 companies, using its proprietary sustainability rating system. The forward-looking ratings are derived from direct engagement with companies, aggregating approximately 15,000 individual company meetings per year.

The data found that a company’s market performance and ESG rating are positively correlated, even in a crisis. The equity and fixed income securities issued by companies at the top of Fidelity’s sustainability rating scale (A and B) on average outperformed those with average (C) and weaker ratings (D and E) in this short period, with a remarkably strong linear relationship.

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