ESG and Value Investing

  1. ESG and Value Investing




Nowadays we are no longer able to disregard the environment and the wellbeing of people in our investments and we have the responsibility of fostering a greater awareness of sustainability. Fundamentals analysis and our value approach will remain crucial in creating value over time. Integrating environmental, social sustainability and governance criteria (ESG) using the traditional models of value-based financial analysis, can benefit the investment strategies.


We apply a model that we developed in-house to evaluate environmental, social and governance (ESG) sustainability when selecting securities.
This “best-in-class” model is designed to identify best practices in the sectors concerned.
We analyse the companies’ sustainable financial statements and we meet periodically the management of the businesses in which we invest.
After the analysis, we appoint an internal rating to each stock using a statistic model and comparing our rating with the one assigned by the international rating agencies.


Companies which adopt good sustainability practices in all ESG spheres – environmental, social and governance – are rewarded by the market. This is the result of the research “ESG ratings and market performance: a study of Stoxx Europe 600 index stocks” conducted by Banor SIM and the School of Management of Politecnico di Milano using the same methodology as adopted by Harvard Business School to analyse the US market. An analysis of market returns shows that Stoxx Europe 600’ stocks belonging to the quartile of companies with the highest ESG ratings are the ones that perform best and show a higher growth in earnings and better margins.


Bonds of companies with a high sustainability rating has best performances than bonds of companies with a low ESG rating. This is the result of the research “The relationship between ESG ratings and the yield spread of bonds on the European markets” conducted by Banor SIM and the School of Management of Politecnico di Milano. The study analyses the market performances of a sample of bonds listed in Europe between 2014 and 2018. This research has demonstrated that the European bond market, especially in more recent years, also considers the ESG rating of an issuer as a parameter that impacts the expected yield. By comparing a panel of listed bonds, including the most liquid ones, it was seen that the performance of bonds associated with ESG best practices was better, especially for high-yield bonds and that the determining parameter, by a long shot, is linked to good Governance.
Sustainability makes a bond rich


Banor SIM is contributor of CFA Guidebook dedicated to the ESG Investments with a publication on Value Investing and ESG. Published by CFA Society Italy and Advisor private.
“Of the many financial investment philosophies, value investing is without a doubt one of the best known. The theory was first developed by Graham and Dodd in their famous “Security Analysis”, which dates from 1928. But value investing probably reached its peak fame with Warren Buffet, who is still today its chief exponent.
Essentially, value investing rejects the idea of efficient markets. So according to followers of the value philosophy, it is possible over time to obtain better performance than the market, through in-depth study and analysis of companies’ financial statements and fundamentals.”
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Banor SIM is a partner of the Sustainable Investment Forum, known in Italy as the Forum della Finanza Sostenibile, or FFS, with the aim of fostering a greater awareness of sustainability. The FFS is a non-profit, multi-stakeholder organisation founded in 2001. Its members include operators from the financial community and other organisations interested in the environmental and social effects of financial activities.
The Sustainable Investment Forum’s mission is to promote and support the inclusion of environmental, social and governance criteria in investment policies and processes. Since 2012 the FFS has been promoting and coordinating Sustainable and Responsible Investment Week (SRI Week) in Italy ( At the international level, the FFS is a member and board member of Eurosif, an international organisation whose mission is to promote financial sustainability in European markets. Find out more: