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How Sustainability is Disrupting Value and Momentum Investing-And What It Means for Your Portfolio
Value- and momentum investing have been foundational strategies for financial professionals seeking to balance risk and return. Value investors traditionally focus on company fundamentals, while momentum investors capitalize on stock trends. Value investing therefore involves buying undervalued companies and selling overvalued ones. Momentum investing means buying stocks when there is an uptick in price or a history of consistent gains, and selling them when the price seems to be trending down.
These approaches have long served as basic strategies for portfolio management (although it is worth noting that one and the same portfolio would typically be managed with only one of the above strategies). However, as sustainability emerges as a critical factor, financial analysts must also account for Environmental, Social, and Governance (ESG) considerations. Whatever the trends of the day and the political sentiment about this topic; fact is that sustainability has become deeply embedded in and intertwined with business performance. Sustainability is today viewed as tool to mitigate short- to mid-term risks, and also as a key driver of long-term value creation.
Increasingly, ESG factors are influencing how companies are evaluated, presenting new opportunities…
