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Deep Dive: ESG lens may boost value opportunities

Biotech trusts top performance charts in February

James Baxter-Derrington, Investment Week, 18 November 2022:

Inflation and tightening monetary policy have combined to benefit value investors in the near term, while an ESG lens may provide long-term opportunities in the US and globally.

Speaking to Investment Week, Aaron Dunn, co-head of value investing at Eaton Vance, said inflation and tight monetary policy will “likely be with us for far longer than appreciated”, which may result in a period of “prolonged value investing outperformance”.

He added that an ESG lens presents a “compelling opportunity” for value investors…

Within the global landscape, Richard Saldanha, global equity fund manager at Aviva Investors, argued the utilities sector has a “key role to play” from a social standpoint…

Regardless of the outcome, James Carthew, head of investment companies at QuotedData, said all boards and managers of trusts are “cognisant of ESG” and “most feel the need to incorporate some degree of ESG assessment into their stock selection process”.

One fund that has sought to differentiate itself on these grounds is BlackRock Sustainable American Income, which Carthew explained aims to deliver a “better ESG outcome than the average stock in its benchmark index (the Russell 1000 Value Index) and a lower carbon emissions intensity score”, a practice adopted at the end of July 2021…

However, as Carthew pointed out, this has yet to translate into outperformance of its benchmark, with the fund returns two percentage points lower than the Russell 1000 Value index for the 12 months to 30 September 2022 and underperforming abrdn’s North American Income trust by five percentage points.

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