Research conducted by State Street Global Advisors (SSGA) has shown a link between companies that adopt environmental, social and governance (ESG) concerns and their performance in market downturns.
Preliminary findings indicated companies that rated highly in incorporating ESG factors into their practices generally suffered less during the 2008-09 market downturn.
While detailed findings are yet to be released, the inclusion of bear market data into research on the long-term value of sustainable investing means anecdotal and logical arguments around this investment style can now be tested.
"The financial turmoil that unfolded since [2008] has provided the missing dataset by which these stories can be tested and facts are beginning to emerge," SSGA said.
The report, titled "Sustainable Investing: Positioning for Long-Term Success", warned institutional investors they must take sustainable investing and their roles as "stewards of capital" seriously if they were to adequately evaluate investment opportunities now and into the future.
SSGA ESG investing vice president Chris McKnett said Australian institutional investors were among the most demanding of their asset managers to consider ESG issues.
"In my view, Australia has gone from zero to 100 very quickly. The main catalysts for ESG growth in Australia have been the decision by many superannuation funds to include ESG options in their line-ups, as well as the formation of groups like the Responsible Investment Association Australasia," McKnett said.
However, he said that demand was only slowly beginning to manifest in research and product innovations, despite Australia's keenness to move forward.
The final report and the background to the findings are to be released later this year.
