Investors Prefer Tech Companies with Good ESG scores

Published on: 09 March 2022
by KnowESG
Technology abstract

A Brief Summary

According to a report by Janus Henderson Investors, the investors are looking forward to investing their money in tech companies having good ESG scores. They say it is worth investing in tech companies that maintain good ESG scores.

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The report by Janus Henderson Investors analysed the value of 700 equities in the technology sector and concluded that Investors have become ESG-conscious. They do not want to take any chances and do not wish to put their money in companies having low ESG scores.

Janus Henderson Investors' Global Technology Leaders (GTL) team revealed the results of a series of tests aimed at determining whether there was a relationship between ESG factors and a company's valuation.

According to Alison Porter, portfolio manager for the Janus Henderson Global Technology Leaders strategy, the report displays the significance of ESG factors, validating the team's investment process, which incorporates an ESG scoring system.

She said: “Our team’s analysis shows empirically that companies which perform well on ESG metrics, and which can show significant improvement in these factors, will be valued more highly by investors in the markets and, crucially, that ESG factors must be an integrated part of the investment process.”

The team found that companies with higher ESG scores have more valuation multiple from the market than their counterparts with low ESG scores. The team assessed valuation multiples for P/E, EV/sales and EV to EBITDA.

Porter said: "In our view, effective active engagement to improve environmental, social and governance aspects of performance is likely to have a positive impact on capital returns, however owning companies that are laggards on ESG metrics is appropriate only with a measured action plan.”

The report is published for the first time on the technology sector, as other studies previously focused on stock price performance across multiple sectors. It concludes by saying that Companies in the technology sector that follow sustainability and best practices can accelerate their market valuation.