Crisis-Tested: When Markets Fold, Sustainability Holds

Time and time again we have seen that companies with more sustainable practices — especially those grounded in sound governance — don’t just survive systemic sell-offs; they have outperformed. Whether it’s the COVID-19 crash, the Russia-Ukraine war or the latest tariff-driven turmoil with moves of a magnitude last seen during the 2020 COVID-19 crisis, companies that prioritized sustainability consistently demonstrated greater resilience.

We looked at how much of a company’s return could be explained by sustainability, correcting for all other commonly used factors such as size, region or style, using the ESG factor in the MSCI Barra factor-attribution model. Early signs suggest that sustainability is again proving resilient during the current market sell-off — from April 1 to April 8, 2025, MSCI ESG Indexes have outperformed.

Our long-term research confirms that companies with higher MSCI ESG Ratings are associated with lower earnings variability and reduced residual CAPM volatility. Additionally, companies with the highest ratings have historically had fewer instances of catastrophic drawdowns (50% or more), supporting the view that sustainable practices are financially prudent.

As global markets experience the market turbulence and economic uncertainty posed by rapidly changing tariff and trade policies, sustainability grounded in sound governance may offer investors valuable protection against downside risks.