How Did ESG Perform in Q1?

EARTH DAY 2021: ESG indexes thrived in 2020 but have lagged in the first quarter of this year, according to Morningstar analysis. But the long-term case remains strong

Dan Lefkovitz 19 April, 2021 | 10:29AM
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The first quarter of 2021 was a challenging one for the performance of investments screened on environmental, social, and governance (ESG) criteria. Why? The best performing sector in global equity markets was energy, while technology was the worst. ESG screens tend to favour technology and avoid the carbon-intensive energy sector.

Reflecting ESG’s first-quarter struggles, Morningstar’s range of ESG-screened indices generally underperformed their broad market equivalents in the first quarter, with some important exceptions. For sustainable investors, it’s a reminder that any deviation from a broad market portfolio will inevitably go through cycles. Sustainable investments performed well as a group during the growth rally of recent years but will remain challenged if the energy sector continues to lead the market.

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About Author

Dan Lefkovitz

Dan Lefkovitz  is strategist for Morningstar’s Indexes group