Research from JP Morgan has highlighted how ESG strategies are being used to manage ESG funds.
Of the major ESG strategies, exclusions and integration remain the most popular. For global asset under management, JP Morgan found the most popular strategies are:
Negative/ Exclusions Screen: 35% of global AUM
ESG Integration: 32% of global AUM
Norms Based Screen: 9% of global AUM
Positive/Best in Class: 4% of global AUM
JP Morgan has also published those companies that are most and least attractive:
Negative/ Exclusions Screen
Kuehne & Nagel
More generally, JP Morgan also found the past 6-months has seen ESG show excess long returns of 7.3% with performance starting to favour Social and Governance issues. They warn that ESG investing is to remain highly vulnerable over the short term due to extreme valuations and concentrated style / sector exposure.
The research headed up by Khuram Chaudhry finds that, “ESG valuations now reside above the upper standard deviation band on a prospective P/E relative of 1.4, which is more or less at an all-time high. Moreover, the underlying sector tilts continue to favour long Technology and short Energy at a time when the prospect of rising bond yields make ESG strategies highly vulnerable to rotational risk or a valuation de-rating”.