Quarterly report
Industry exposure a key swing factor in regional performance
Highlights
- EO regional divergences - Environmental Opportunities continued to recover in Europe in Q4, benefiting from an overweight in Industrials and an underweight in Staples. It lost ground in the US, reflecting its large Tech exposure. The underweight Financials was a significant headwind in Japan
- ESG uplifts and performance - Financials and Technology contributed most to ESG uplifts for FTSE4Good. While Financials lifted APAC’s performance, it hurt in EM. For FTSE4Good US, the underweight in Consumer Discretionary more than compensated for the losses from Tech
- Energy underweight takes biggest toll in the US - UK’s underweight to Energy was additive for the first time in 2022, but this was offset by the huge sell-off in Telcos, despite small active weights. Underweights in Energy were only significant headwinds in the US
- Valuations continue to contract - Forward P/Es for SI indices in the UK and Japan all trade below their five-year averages, particularly for Environment Opportunities. Premiums for EO have narrowed globally, particularly in Japan and APAC
- Telco selloff another swing factor - ESG Low Carbon Target indices in the UK and Europe were hit hardest by the sharp retreat in Telco stocks in the quarter
Published quarterly, this report views investment outcomes through the lens of FTSE Russell’s sustainable investment index strategies and is essential reading for institutional investors interested in sustainable investment. It's part of a series of Market Maps reports, available by email as soon as they are published.
