How to be "Good" With Your Money

Investors are increasingly considering how ESG may play a part in their portfolios. Here’s a checklist for those looking for help

Sara Silano 3 December, 2020 | 9:58AM
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ESG

Growing environmental, social and economic issues are challenging us to reduce waste and pollution, avoid plastic items and be eco-friendly. Research refers to it as “sustainable lifestyle”, or “living well within the earth’s limit”. How you put that into practice can vary, from  Practices encompass a wide range of activities, including energy and water conservation, waste recycling, “green” consumption, travel and tourism behaviours. We struggle to be sustainable consumers, so how can we be sustainable investors?

Sustainable funds have been attracting more and more flows. Assets in sustainable funds hit a record high of $1,258 billion as of the end of September 2020. Europe surpassed the $1 trillion mark. Hortense Bioy, Morningstar Director of Sustainability Research, says: “The strong inflows speak of the growing investor interest in ESG issues, especially in the wake of the Covid-19 crisis. The disruption caused by the pandemic has highlighted the importance of building sustainable and resilient business models based on multi-stakeholder considerations. The average outperformance of sustainable funds in the first quarter globally has also helped alleviate some investors' concerns about a potential return trade-off in sustainable strategies”.

Fund companies have raced to respond to this interest, both by launching new ESG offerings and repurposing existing one with a sustainable gloss. But many investors may be confused by the wider (and ever-growing) range of products. How we can distinguish between what is ESG and what it isn’t?

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Sara Silano

Sara Silano  is Editorial Manager for Morningstar Italy