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Strengthening portfolio immunity

Strengthening portfolio immunity

08-06-2020 | Article
The COVID-19 pandemic has been an existential stress test playing out in real-time where only the resilient will survive. ESG analysis goes deeper to identify sources of company resilience that go undetected in traditional financial analysis.
  • Jacob Messina, CFA
    Jacob
    Messina, CFA
    Senior SI Strategist
  • Michael van der Meer, CFA
    Michael
    van der Meer, CFA
    Head of SI Research

Speed read

  • Coronavirus pandemic a real-time stress test for demonstrating the value of ESG
  • Fundamental investment strategies that incorporate ESG outperformed their non-ESG benchmarks
  • Sustainable companies will be better prepared for future risks and fat tail events

The COVID-19 pandemic has been an existential stress test for companies globally—one that will display their strengths, reveal their weaknesses, and push them to never before seen limits for survival.

RobecoSAM and Robeco consider sustainability the determinant factor in signaling a company’s resilience and shock resistance which is why we focus on ESG criteria when selecting companies for our portfolios. Resilient portfolios are less vulnerable to systemic risks resulting from weaknesses such as poor human capital, inflexible processes, over-extended supply chains, and excessive environmental footprints. True to their design, sustainable investment strategies have been resilient relative to the broader market over the course of the pandemic thus far.

Here we discuss why crisis planning should be part of portfolio construction and why a focus on ESG offers more comprehensive diagnostics that can help bolster company and portfolio immunity.

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