Companies high on ESG scores fall less amid a selloff
In the corporate governance landscape globally, the institutional investors have been placing a significant focus on ESG indicators of a company while making any investment decision. In a recent study released by MSCI (Morgan Stanley Capital International) with its ESG indices(environmental, social, and governance) focusing India, it has been established that ESG indicators have outperformed other benchmarks/indicators by more than 5 percent during the COVID-19 related selloff. The MSCI India ESG Leaders index has declined 15 percent so far this year, compared with a fall of 20 percent by the MSCI India index. So, in view of the above, it seems that ESG companies are better equipped to handle the present pandemic in the form of COVID-19. The top constituents of the MSCI ESG Leaders index in India are Reliance Industries, HDFC, Infosys, TCS, HUL, Bharti Airtel, Axis Bank, HCL Tech, Asian Paints, and Nestle India.
(MSCI) has set up many global indices, one of which is a composite of Indian stocks - the MSCI India index. The MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.On the other hand, the MSCI India ESG Leaders Index is a capitalization-weighted index that provides exposure to companies with high Environmental, Social, and Governance (ESG) performance relative to their sector peers. MSCI India ESG Leaders Index consists of large and mid-cap companies in Indian markets.
As the present situation is indicating that the pandemic is here to stay for some more time, investors are seeking allegiance to companies having strong ESG performance with a focus on its stakeholders, adaptive approach to governance structures, and the social contract. The investors are expecting that these companies will remain resilient and give a good performance. When COVID-19 like crisis took place, it has huge social and environmental repercussions. So, investors see ESG compliant companies as more reliable and able to generate superior financial returns in the future.
