October 12, 2023

Sustainable Investment Insights - October 2023

Quarterly report

Tough environment for sustainable investment in Q3

Key highlights:

  • Energy - Energy stocks strongly outperformed in Q3 as continued oil production cuts in Saudi Arabia and Russia led to brent oil rising from $75 at the end of June, to $95 at the end of September. This resulted in Energy stocks being by far the best performing industry in the FTSE All World index and a headwind for SI indices, which are all underweight Energy
  • Green equities - Green equities, as captured by the Environmental Opportunities index, were 2.8% behind the market in Q3. This ended a strong run, after all of the underperformance in 2022 had been recovered in H1 2023. The weakness came from profitability issues in global renewable energy equipment companies and issues in UK water utilities
  • ESG - Like in 2022, ESG focused indices, such as FTSE4Good, were the best performing SI indices. A lower valuation, higher yield and smaller Energy underweight, all helped the index
  • Japan - Mirroring the broader market, Japan was the clear outperformer in SI. All Japanese-focused SI strategies outperformed in Q3, driven by a strong selection in Consumer Discretionary
  • Valuation - P/E valuations fell in Q3. Env Ops valuation particularly reduced through both price weakness and improving earnings growth expectations in 2024, putting it lower than its five-year average
  • Macro - “Higher for longer” interest rates became the dominant market narrative as central banks continued to struggle with stubborn inflation. Longer dated yields rose, curves flattened and investors sought refuge in money markets

To support your investment decision-making, we produce specialist content that provides analysis and insights on a range of investment topics. Go to our hub for valuable Market Insights.

Webinar - Wednesday October 19, 2023

Sustainable Investment: Strategy outcomes for equities and fixed income

Lee Clements

Head of Applied Sustainable Investment, Global Investment Research, FTSE Russell

Evan Liu-MacNeaney

ESG Specialist, Europe, Vanguard

You will hear a review of investment outcomes through the lens of FTSE Russell sustainable investment index strategies including global equities, fixed income and our TPI Climate Transition indices. Evan and Lee will also address key questions facing sustainable investment in 2023 such as:

  • What impact are current macro-economic uncertainties having on different sustainable investment strategies?
  • Are these uncertainties impacting the clean energy roll out?
  • How are sustainable investors reacting in the current market?

The discussion will draw upon key findings from our quarterly Sustainable Investment Insights report published shortly before this webinar.

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