Financial Benefits

Sustainable investments can do just as well as, or even outperform, non-sustainable investments.

Capital is at risk with all investing, but the research couldn’t be clearer that sustainable and ESG funds are worth considering on a financial basis alone.

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Morgan Stanley 2019

Morgan Stanley’s Institute for Sustainable Investing compared the performance of sustainability and non-sustainable funds 2004-2018.

Over the 14 years sustainability funds performed similarly to mainstream funds, with no statistically significant difference in total returns. The study also showed that sustainability funds have lower risk than mainstream funds and outperform when the market is unpredictable (volatility). Here is a link to the full paper: Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds.

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Morningstar 2019

Looked at 2,232 sustainable funds registered for sale in Europe.

59.4% of them fell in the top half of ALL funds for five year performance.

Find more here. 

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Bloomberg 2019

Nine of the biggest ESG mutual funds in the U.S. outperformed the S&P 500 Index in 2018. Seven of them beat their market benchmarks over five years.

Read more here.

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Aggregated evidence from more than 2000 empirical studies 2015

The most exhaustive overview of academic research on ESG and Financial Performance, the results show that the business case for ESG is empirically very well founded. Roughly 90% of studies find a nonnegative relationship between ESG and performance. More importantly, the large majority of studies reports positive findings.

Read the full study. Gunnar Friede, Timo Busch & Alexander Bassen (2015) ESG and financial performance: aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment, 5:4, 210-233.

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A Reading List of Further Evidence

AQR 2017, ‘Assessing Risk Through Environmental Social and Governance Exposures’

Nordea 2017, ‘Cracking the ESG Code’

JP Morgan 2016, ‘A Quantitative Perspective of how ESG can Enhance your Portfolio’

Barclays 2016, ‘The positive impact of ESG investing on bond performance’

Credit Suisse 2015, ‘Finding Alpha in ESG’

MSCI 2015, ‘Can ESG Add Alpha’

Harvard Business School 2015, ‘Corporate Sustainability: First Evidence on Materiality’

Journal of Sustainable Finance and Investment 2015, ‘ESG and financial performance: aggregated evidence from more than 2000 empirical studies’

Journal of Business Ethics 2015, ‘The Opportunity Cost of Negative Screening in Socially Responsible Investing’

Deutsche Bank 2013, ‘The Socially Responsible Quant’

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