Energy boom dents RI fund performance
Australian equities funds with high responsible investment (RI) credentials have lost money for a second consecutive quarter thanks to the outperformance of energy stocks, according to Evergreen Consultants.
Top-quartile Australian equity managers in the Evergreen Responsible Investment Grading (ERIG) index had lost 11.8% in the June quarter, compared with an 11.9% fall in the ASX 200. Equity funds in the second quartile lost 12.7% in the June quarter. This followed falls of 4.4% by top-quartile funds in the March quarter.
The ERIG Index scores were based on seven RI capabilities: ESG integration; negative screening; norms-based screening; active ownership; positive screening; sustainability-themed investments; and impact investing.
Evergreen Consultants director, Michael Ohlsson, said the performance so far this year had been driven by a rotation out of tech stocks and into energy stocks, which responsible investment funds tended to avoid.
Shares in Whitehaven Coal had risen by 113% since the start of the year while New Hope was up 84% and Woodside was up 38%.
“Fund managers with a responsible investment or ESG tilt tend to favour tech stocks and avoid materials and energy stocks.”
Ohlsson said that, leaving aside the big swing back to energy this year, funds with high responsible investment scores had performed in line with the index over the past three years. An important issue underlying recent performance was that RI investing in Australia was still relatively new and there was a lack of depth in the stocks available to RI managers.
“We do expect some volatility in terms of performance, compared with the index. In the short term there will be some growing pains for the sector,” he said.
“Despite short-term performance issues, we are starting to see evidence that over the long term RI investing does not cost you performance.”
AUTHOR
Liam Cormican
Recommended for you
Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equity firm.
An independent expert has ruled the Perpetual deal with KKR is no longer in the best interest of shareholders in light of the increased tax liabilities.
The Australian wealth management firm has named a custodian for its MLC and OnePath businesses following an extensive tender process.
Global real asset manager CapitaLand Investment has announced a key acquisition from Wingate as part of its growth strategy in Australia.
