While the extraordinary growth of sustainable investing is continuing – in particular in Europe, which accounted for 76% of all sustainable funds by count, 81% of assets, and 72% of the first-quarter flows in 2020 – the word about the likely “win-win”, doing good while enjoying positive returns, is spreading amongst investors. In a Schroders study, 47% of the 23,000 private investors surveyed said that they’re attracted to sustainable investments because of their wider environmental impact, while 42% felt the reason they were attracted to sustainable funds is because they are also likely to offer higher returns.
Indeed, ESG funds are proving to outpace their more conventional funds rivals – not in every sector but for a majority – on a ‘positive impact’ level as well as in respect of return on investment: In the first eight months of 2020, the average ESG funds globally in the Investment Association (IA) Global sector delivered a 10.10% return compared to a 4.09% return on average from conventional counterparts. And while investors putting money in the 19 ESG funds in the IA UK All Companies sector were faced with losses in that period, these were – with an average loss of 14.15% – lower compared to the average 17.30% drop in value of their traditional peers.
A comparison between sustainable indexes and their non-sustainable counterparts presents a similar picture: Over the course of 2020, 81% of a globally representative selection of sustainable indexes outperformed more traditional indexes. This outperformance was even more pronounced during the first quarter downturn, emphasising the resilience of sustainable funds in the face of adversity.
The same holds true while looking at data from the past five years: ESG-focused indices consistently either match or exceed the returns made by their standard counterparts, amid comparable volatility. ESG portfolios also show more resilience in market downturns.
Furthermore, looking at longevity, sustainable funds have proven to be frontrunners again: 72% of sustainable funds available to investors globally ten years ago have survived, while only 45.9% of traditional funds achieved to last as long.