Why Good Companies Can Make Good Stocks

Can companies that consider their environmental impact, make diversity a priority, or focus on responsible corporate governance achieve better long-term financial results? There is growing evidence that the answer is “yes,” according to The ABCs of ESG, a report that explores looking beyond financial factors to assess a company’s health. In fact, ESG can help investors identify companies that are: Less likely to go bankrupt, less likely to have large price or earnings declines, and are more likely to become high-quality stocks in the future.

As Savita Subramanian, head of U.S. Equity and Quantitative Strategy at BofA Merrill Lynch Global Research, notes in the video above, “At a very basic level, ESG investing incorporates thinking about factors that extend beyond valuation or growth.” More and more investors are recognizing the power of this approach, as the 40% annualized increase in total assets invested in U.S. equity funds using ESG strategies from 2000 to 2017 indicates.1 The report also concludes that investor interest is just getting started. According to Subramanian, “Our research makes us confident that ESG investing is here to stay.”

Source: 1. Strategic Insight SimFund, BofA Merrill Lynch U.S. Equity and Quantitative Strategy

1/17/19


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