Kurtz (2016)

Lloyd Kurtz.  “Moats and Sustainability.”  Presentation to CQAsia Conference, Hong Kong, November 2016.

Author’s abstract: “Since the financial crisis several studies have argued that markets treat responsible companies as if they are fundamentally ‘better’ in some way:  Nofsinger and Varma (2013) find that responsible funds had stronger performance during the financial crisis than might be expected from their factor exposures;  DiBartolomeo (2010) shows that markets expect companies in a social index to survive longer than companies that are not represented.  This research explores the idea that these observations can be attributed to the superior fundamental characteristics of responsible companies, notably the sustainability of their competitive position as expressed by Morningstar Economic Moat ratings.  We find a strong association between membership in North American social indexes and wider economics moats.  We also find that one alternative explanation - that responsible companies might have faster growing and/or more predictable earnings (as measured by S&P quality rank) - is not supported.”