Coronavirus Round-up: ESG outperformed during sell-off, says MSCI

MSCI has compared the performance of four of its global ESG indices to their parent indices during the Covid-19 sell-off, concluding that the ESG indices, which use a range of methodologies, outperformed. Its SRI index showed the strongest performance, according to the research. A number of regional and sub-regional ESG indices also outperformed their market-cap-weighted benchmarks in the first quarter of the year, although emerging markets versions underperformed. The pandemic, according to the analysis, is the first real-world test since the 2008 global financial crisis of the resilience of companies with high MSCI ESG Ratings, and the findings support MSCI’s previous research which found certain high ESG-rated companies were less exposed to systematic risks.

BPIFrance Financement, a subsidiary of the French public investment bank, has issued a seven-year €1.5bn Covid-19 bond with a coupon of 0.125%; the first in the country. The Covid-19 Response Bond is designed to support French companies with ongoing cash flow for their operations and employees in a bid to preserve employment and reduce the social and economic fall out from the pandemic. If some of the proceeds are not deployed, Bpifrance Financement will use them to offer loans to SMEs that contribute to the SDGs – specifically Decent Work & Economic Growth and Industry, Innovation & Infrastructure. 

MAPFRE, the largest insurance company in Spain, has launched a Compromiso Sanitario fund to finance the purchase of healthcare equipment to combat Covid-19. The underlying asset for the mutual fund, which guarantees a return of 3% over three years, is a bond issued by the Madrid local government. Fund equity is limited to €50m and each investor may contribute up to €50,000. BNP Paribas, the depositary for the fund, has waived its fee. 

Templeton Global Macro has updated its ESG index for sovereign bonds to include health security, particularly the ability of countries to cope with Covid-19. The top scorers in developed markets are the US, the UK, the Netherlands, Australia and Canada. Emerging and frontier markets with weaker positions include Sri Lanka, Nigeria, Ukraine and Egypt. The report also provides case studies on the impact of environmental issues including water security, air pollution and deforestation on sovereign risk profiles.

UK campaign group Feedback is calling on investors to stop financing the meat and dairy industry. “Through habitat destruction, which drives pathogens from the forests to food markets, and by incubating new pathogens in factory farms, industrial agriculture makes future pandemics more likely,” the group said in a statement. “These very same processes drive climate breakdown – up to 29% of global emissions come from the food sector, the vast majority linked to industrial animal agriculture.” A full report can be found here.