Luc Olivier on how ESG can improve performance in the long term

Ahead of the Virtual Edition of the Sustainable Investment Forum Europe 2020, 4-Part Digital Event Series starting from 8 September, we caught up with Luc Olivier, Fund Manager of Echiquier Positive Impact Europe from La Financiere De L'Echiquier, to discuss how ESG can improve performance in the long term.

Q. Can ESG drive up performance and if so how?

One of the most widely spread misconceptions about responsible investment is its inability to generate good financial returns. At LFDE, with 13 years of responsible investing experience on listed equities, we have a strong conviction that SRI and performance are not incompatible, quite the opposite! Last year, we decided to conduct a study to confirm this conviction and the results are impressive.

ESG drives up performance in the long run. Our SRI & Performance study, conducted on European listed equities, proves that there is a strong correlation between ESG ratings and stock performance. Investing systematically in companies with the highest ESG profiles delivers, over 10 years, a performance twice as strong as investing in companies with poor scores.

The reason is simple: a company that takes into account all of its stakeholders (shareholders of course, but also employees, clients, suppliers, the environment...) into its business model, will be able to create sustainable value that will benefit for all, including shareholders. For instance, if a company is able to sustainably attract and retain its employees (training programs, work-life balance, fair remuneration, no discrimination...) this will improve their engagement with the company, driving up self-productivity, better margins and ultimately improving stock performance.

Q. Can you explain portfolio resilience in Q1 2020?

A. We have found that companies with the best ESG portfolios are those with solid balance sheets. Given the high level of risk liquidity, the market favours those companies seen as safe havens. The proper identification and management of non- financial work which characterises responsible companies is essential in the context of a health crisis. The protection of employees and customers allows these companies to bounce back both faster and sustainably. We have found that flows are increasingly directed towards companies with high ESG ratings subsequently leading to a rise in their stock prices.

 

Download the full interview along with other industry leader interviews by clicking here.

 

The Virtual Edition of the Sustainable Investment Forum Europe 2020 will take place on the 8th, 11th, 15th and 22nd September 2020. Secure your place today by registering for free here.