Pearl Impact Capital Blog Q2 2021 Market& Performance Review

Equities posted another strong quarter thanks to ultra-loose monetary policy, fiscal stimulus, vaccine traction, reopening momentum, and positive earnings surprises. The information technology, real estate and communication services sectors outperformed amid a broad-based rotation back into growth stocks. The rotation coincided with lessened concerns over inflationary pressures, as investors considered signs that price increases would be only transitory in the early stages of the recovery. The cyclical energy and financial sectors are still the best performers for the year-to-date.PIC portfolios modestly trailed their respective benchmarks in the second quarter, but have keep pace for the first half. During the quarter, PIC healthcare and technology stocks outperformed, while industrials and financials lagged. Lack of energy exposure was again a headwind as oil prices continued to move higher. Geographically, European stocks were positive contributors, while U.S. performance slightly lagged. Longer-term returns remain well above benchmark for all PIC strategies.Companies may be seeking a marketing boost when they issue climate pledges. Some may see the writing on the wall for increasing temperatures, intensifying storms, and rising sea levels. However, their actions still leave the major stock indexes lagging when it comes to slowing global warming. No major stock indexes are currently on a pathway to hit the broadly used target of keeping global warming below 2°C above pre-industrial levels, much less the more aggressive 1.5° target that is increasingly pushed by environmental interests. The annual emissions of the world's listed companies remain at the same level as 2013, according to a report from MSCI, which warns that firms have less than six years to get their emissions under control if the world is to avoid the worst impacts of climate change.If a company doesn't have a plan, if it isn't moving to get its emissions down, it's very risky and will ultimately be starved of capital. At PIC environmental risk and opportunity are a key factor in investment analysis. Corporations must have a plan and strategies in place to mitigate environmental impact and increase efficiencies, or we simply won't invest.We believe that high quality global leaders with high returns on capital and strong ESG characteristics will outperform in the long run. We will continue to search the globe for companies that exhibit such attributes for PIC strategies.PIC Q2 2021 Report