Can ESG Investing Reduce Risk?

Could ESG investing reduce risk and boost returns? Analysis of the past five years suggests the answer is yes

Dan Lefkovitz 18 February, 2021 | 11:24AM

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In the five years to the end of 2020, the Morningstar UK Sustainability Index recorded a 5.7% average annual gain, compared to 4.6% for its non-sustainable counterpart, Morningstar UK Large-Mid Cap Index. During recent rough patches like the fourth quarter of 2018 or the first quarter of 2020, the index declined less than the market.

The UK is not a unique case. According to a recent study of nearly 70 Morningstar indices focused on markets across the globe between 2016 and 2020, environmental, social, and governance (ESG) criteria added value and dampened volatility.

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About Author

Dan Lefkovitz

Dan Lefkovitz  is strategist for Morningstar’s Indexes group

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