Did ESG Pay Off for Fund Investors Last Year?

Funds with less ESG risk topped their indices more often than funds courting more ESG risk in a topsy-turvy 2020

Jeffrey Ptak 12 January, 2021 | 10:06AM
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Investors might consider an ESG fund for various reasons, such as a desire to advance non-financial goals like combating climate change, or pursuing racial and gender equity. Whatever the goals, there’s been a lot of debate about the relationship between ESG and investment performance. Some argue it hurts returns while others say the opposite. Given this, we thought we’d examine how ESG-rated funds performed in 2020.

To briefly review, we assign Morningstar Sustainability Ratings, also known as “globe” ratings, to funds based on how much material unmanaged ESG risk their holdings court. Funds whose holdings court less ESG risk receive higher ratings (that is, 4 or 5 globes) while those whose holdings court more risk get lower ratings (that is, 1 or 2 globes).

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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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Jeffrey Ptak  Head of Manager Research