BlackRock, Allianz Global Investors, and Invesco have all published research showing SRI and ESG portfolios outperformed when the market turned south due to the coronavirus crisis. The backend protection provided by the impact investments could also be seen in robo advisors.
During the first quarter of 2020, five of the eight SRI portfolios tracked by Backend Benchmarking, which tracks the performance of various robo advisors, outperformed their non-SRI counterparts from the same provider on a net-of-fees basis.
While underlying ETFs in SRI portfolios are usually more expensive because they require more management than that of run-of-the-mill index funds, Backend Benchmarking research analyst David Goldstone said, “Investors thus far are not paying a significant performance premium to invest with some values.”
As it turns out, this is nothing new. According to Goldstone, macro trends show SRI and ESG portfolios managed by robo advisors also outperformed across longer time periods. While part of this may very well be due to impact investing portfolios not being titled towards value stocks--which have underperformed during the last few years of the bull market--as much as standard portfolios, it’s also an indication of the time and the future of investing.
Goldstone sees the SRI and ESG fields maturing and, therefore, growing in popularity and quality. He expects their quality to only continue to improve as time goes on. If robos and impact investment continue to improve as he expects, it seems the sky may be the limit for value conscious investors.
