GLOBAL - Sustainable investment funds are perceived to be more attractive in the long run which helps them perform better in times of market turbulence, according to Wolfgang Pinner, managing director at Austrian SRI fund manager Vinis.
In August the Dow Jones Sustainability World index returned 0.3% compared the to -0.2% returned by the MSCI World Total Return index.
Similarly, the Austrian sustainability index Vönix, created in 2005 by Vinis' owner VBV, continued to outperform the Viennese stock exchange's ATX Prime index by 0.3% even through the market turbulence.
"Over the long term people expect stocks in the SRI sector to be more attractive than other shares," Pinner explained to IPE.
According to him this trend is fuelled by the very positive perception of the issues surrounding climate change and sustainability as well as changes in environmental policies.
"And this perception does not change in times of economic difficulties," he added.
Another factor contributing to good performance of SRI funds in times of market turbulence is sector weighting.
"In general it can be said that sustainability funds are positioned somewhat more cautiously towards certain industry sectors," Pinner said. They are on average underweight in cyclical stocks, including sectors such as automobiles, construction, chemicals, paper and mining.
"During a market crisis it is cyclical stocks that suffer first as people begin to doubt economic growth."
Pinner also pointed out that climate change was currently one of the most positively perceived issues. Since its inception in May, Vinis' climate change fund has returned 2.79%, outperforming its benchmark. In September the fund returned 3.95%.
At end-August Vinis' global stock SRI fund, returning 1.7% year-to-date, had outperformed the MSCI World by 0.6%.
Vinis was founded last year as a subsidiary of the VBV Pensionskasse and the investment management company Erste Sparinvest.
It is market leader in the Austrian SRI sector managing €700,000 of a total €2bn SRI fund volume.