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ESG Ratings Financial Performance Blurred but Still Present in 2022
We looked at drivers of returns for companies with different MSCI ESG Ratings in 2022 and found that some systematic factors (such as country, industry or style) flipped the direction of their contribution compared to recent years. This should not come as a surprise, as during the year we have seen a rotation in the performance of sectors (such as energy and information technology) and some style factors (such as value).
Removing the effect of industries, countries and styles reveals that companies with higher MSCI ESG Ratings achieved superior returns as compared to the lower-rated companies. Though the magnitude of ESG-related outperformance in 2022 may have shrunk for companies rated A and higher, they nonetheless stayed on course with their long-term historical track record.
Pure ESG active return contribution
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