More data shows ESG funds are winning at investment

Yet more data is emerging showing how resilient socially and environmentally conscious investments were in the third quarter as stock pickers went from manic in February to panic in March.

Globally, investors sank $36bn into ESG (environmental, social and governance) funds in the March quarter with $20bn of that going to equities, according to financial data company Refinitiv.

The previous quarter saw record net inflows to ESG funds of around $57bn, pumped up by bonds which saw very little cash flowing in or out earlier this year.

Refinitiv data indicated that a majority of ESG funds outperformed their technical indicators in the March quarter.

Earlier Refinitiv data found that while ESG funds lost less money in the March quarter than non-ESG peers, fewer outperformed the market.

However, ESG funds only make up a tiny fraction of the investment instruments available today.

Not just for snowflakes anymore

ESG is moving away from being a niche nice-to-have product to a strategic investment that generates above average returns.

In Australia, financial information provider Morningstar has already shown that funds with low carbon commitments have better-than-average protection from falling markets. While these funds have similar characteristics to their non-ESG peers, they tend to have higher quality portfolios.

While Rainmaker Information found that ESG funds withstood the onslaught of COVID-19 better than non-ESG funds: Australian Ethical Investment (ASX:AEF) is one of a few products to deliver a positive return in 12 months.

ESG is also being cited at the AGMs of major banks and resources companies.

JP Morgan shareholders recently narrowly defeated a resolution calling for the largest bank in the US to issue a report “outlining if and how it intends to reduce the greenhouse gas emissions associated with its lending activities in alignment” with the goals set out in the Paris Agreement.

However, a whopping 48.6 per cent of investors voted for the resolution.

Nearly half of Santos’ (ASX:STO) shareholders backed resolutions calling for the oil and gas company to set targets aligned to the Paris Agreement and to review its membership of fossil fuel lobby groups.

And more than half of fellow gas major Woodside’s (ASX:WPL) shareholders supported a non-binding resolution for the company to cut both its own emissions and the Scope 33 emissions released by consumers of its liquefied natural gas products.

Giant fund manager BlackRock has also flagged a shift in its investments towards more sustainable industries.