The most popular S&P 500 health-care stocks owned by actively managed sustainable equity funds outperformed the least popular names in recent years, according to a study by RBC Capital Markets.
The widely held names tended to have better risk scores on environmental, social, and governance, or ESG, issues as measured by Sustainalytics, than stocks in conventionally managed funds, according to Sarah Mahaffy, U.S. equity strategist at RBC Capital Markets. The most popular among actively managed sustainable funds are
Thermo Fisher Scientific
Actively managed sustainable equity funds typically were more exposed to life sciences, tools and services, and equipment and supplies than conventional managers, and less exposed to pharmaceuticals, providers and services, and biotech. Danaher,
(BDX) were more popular in active sustainable funds than in conventional funds. Conversely,
(ZBH), Allergan, which was acquired by
(MCK) were less popular.
The growing popularity of sustainable funds hasn’t impacted the health-care sector, as both sustainable and conventional funds tend to have similar exposures to the broader group, Mahaffy writes. These popular names are increasingly trading at a premium to the market, Mahaffy says.
Sustainable funds globally attracted about $45.7 billion in net flows during the first quarter of 2020 even as the overall fund universe suffered $384.7 billion in outflows, according to Morningstar.
High U.S. health care costs are “ESG issues affecting human well-being and sustainable economic development,” Katherine Collins, Putnam Investments’ head of sustainable investing, wrote recently.
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