With fund inflows nearly quadrupling to a record $20.6 billion in 2019¹, ESG interest has clearly reached a tipping point … but the COVID-19 pandemic could be a catalyzing event that triggers even broader awareness this year.
As corporations grab positive and negative headlines for their response to the outbreak, we expect more consumers to take interest in companies’ treatment of their employees, customers and community, and invest accordingly.
The trend is already playing out in the first quarter, with ESG funds experiencing a record $10.5 billion in inflows … even as stocks crossed into bear market territory.²
The connection between the pandemic and investor interest is straightforward: crises tend to highlight the important role corporations play in either improving or deteriorating society. We’ve seen some of those positive actions in recent weeks, with manufacturing companies stepping up to produce ventilators or medical supplies, and financial companies seeking to ease the strain on a growing number of unemployed consumers.
In a recent communication to clients, Citigroup noted that investors are asking increasing questions about items such as mortgage relief, in an attempt to identify strategies that limit financial challenges stemming from the pandemic.³ The bank has responded with several actions including fee waivers for select retail banking services and a deferral on minimum credit card payments for consumers affected by the pandemic.
As COVID-19 continues to create health and financial hardships for individuals, we expect more people to invest in funds that push corporations to have a positive influence on the world around them. Advisors will have an important role to play in helping clients find the right strategies.
¹https://www.morningstar.com/articles/961765/sustainable-fund-flows-in-2019-smash-previous-records
³https://www.wsj.com/articles/coronavirus-pandemic-could-elevate-esg-factors-11585167518
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Dana Large Cap Equity Fund top-ten holdings as of March 31, 2020: Microsoft Corp (2.70%), Apple, Inc. (2.66%), Intel Corp (2.43%), Amazon.com, Inc. (2.34%), Alphabet Inc. Class A (2.32%), LAM Research Corp. (2.28%), Walmart, Inc. (2.27%), Merck & Co, Inc. (2.20%), T-Mobile, Inc. (2.15%), Visa, Inc. (2.15%)
Dana Small Cap Equity Fund top-ten holdings as of March 31, 2020: Five9, Inc. (2.52%), Southwest Gas Corp (2.43%), Horizon Therapeutics (2.25%), Emergent BioSolutions, Inc. (2.24%), Qualys, Inc. (2.22%), Coherus BioSciences, Inc. (2.19%), Rapid7, Inc. (2.17%), BioTelemetry, Inc. (2.13%), Repligen Corp (2.12%), Chesapeake Utilities Corp (2.10%)
Dana Epiphany ESG Equity Fund top-ten holdings as of March 31, 2020: Microsoft Corp (2.72%), Apple, Inc. (2.68%), Alphabet, Inc. Class C (2.67%), Amazon.Com, Inc. (2.43%), Intel Corp (2.23%), General Mills, Inc (2.22%) LAM Research Corp (2.16%), Hill-Rom Holdings, Inc. (2.12), Fidelity National Information Services, Inc. (2.10%), Pepsico, Inc. (2.07%)