Global events, such as pandemics, wars or sweeping tariffs, can drive market volatility. Looking back at these events is an opportunity to examine data and understand ways to potentially protect investments from these economic shocks. This new research report focuses on three periods of market disruption over a seven-year period – the covid-19 outbreak, the start of the Russia-Ukraine war and the most recent introduction of US tariffs – to examine the link between US firms’ ESG Risk Ratings and their financial performance.

The analysis found that the Low ESG Risk Portfolio consistently shows strong performance, delivering sustained alpha, including during periods of economic shock. These findings suggest that integrating ESG risk consideration into investment decision making can support the alignment of sustainability objectives with effective risk management, while also contributing to the preservation of financial performance.

Readers of this report will learn about:

• The nuanced relationship between ESG Risk Ratings and financial performance. 
• How ESG risk-integrated benchmark portfolios can guide investors to manage the trade-offs between financial performance and ESG risk. 
• How scenario analysis – in this case, of economic shocks – plays a critical role in refining investment strategies and decision-making processes.