Sustainable practices are holding up well in the global coronavirus pandemic, a bright spot amid the upheaval in communities and markets.
After all, advocates say, good ESG practices are all about risk management. "This has really put the spotlight on how well prepared companies are to manage for a big systemic risk," said Libby Bernick, head of sustainability at Morningstar Inc. in Philadelphia. As companies respond to both the pandemic and the related market sell-off, "investors will be looking at their portfolios and saying, 'What kind of long-term value did they create?'" she said.
Ms. Bernick said that until the pandemic-related market sell-off, there was strong demand for corporate ESG practices across all demographics. And so far, "when we look at the data on performance, we see those companies outperforming."
In 2019, Morningstar data show a nearly fourfold increase over the previous year in flows into U.S. sustainable funds, at $21.4 billion. The first quarter of 2020 also saw record flows into ESG funds and indexes, and by the end of the quarter they outperformed their conventional peers. "This whole data narrative is very strong. We are seeing sustainable funds outperformed others in this downturn," Ms. Bernick said.