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

Top 5:

SGS
Barratt Devs
Lloyds Banking
KPN
L’Oreal

Bottom 5:
Geberit
Ferguson
CNP Assurances
Kering
Next

ESG Integration

Top 5:
Evraz
Logitech
Kinnevik
Kuehne & Nagel
KNP

Bottom 5:
Swiss Life
Johnson Matthey
SGS
United Internet
Gas Natura

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”.