A record year for "ethical" ESG funds

UK-based ESG funds - those concerned with "environmental, social & governance" or more ethical investing – saw £362m of inflows in July, a new monthly record.

Environmental, social and governance (ESG) funds are coming of age. Fund network Calastone says that UK-based ESG funds saw £362m of inflows in July, a new monthly record. Investors have added £1.2bn to ESG investments since April, a figure “greater than all the previous five years combined”. 

One concern about ESG investing is that by excluding parts of the investment universe (such as tobacco stocks) investors are impairing their returns. Yet S&P Global Market Intelligence found that of 17 American ESG-orientated exchange traded and mutual funds, 14 enjoyed higher returns than the S&P 500 in the first seven months of 2020. Low exposure to energy stocks, hit hard by crashing oil prices, helps explain why. 

ESG returns have also been driven by the outperformance of big tech stocks, says Camilla Hodgson in the Financial Times. Most of the top US ESG funds have either Apple, Amazon or Microsoft as their biggest holding. 

As the tech giants have been dogged by controversies over “data privacy, labour practices and monopolistic behaviour” some question just how ‘ethical’ these investments really are. Yet other ESG funds refuse to hold Apple or Facebook at all. That inconsistency is a reminder that the ESG label says little about what is in a fund. If you want to know exactly where your cash is going, there is no substitute for doing your own research.

Recommended

When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced this month – we look at whether they will go up and what the impact will be.
5 Dec 2022
Heated airer vs tumble dryer – which is cheaper?
Personal finance

Heated airer vs tumble dryer – which is cheaper?

What is the most cost effective way to dry your clothes – a heated airer or a tumble dryer? We compare the costs.
5 Dec 2022
Best savings accounts – December 2022
Savings

Best savings accounts – December 2022

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
5 Dec 2022
Scottish Mortgage managers reassure investors about its recent poor performance
Investment trusts

Scottish Mortgage managers reassure investors about its recent poor performance

After a spectacular couple of decades, the Scottish Mortgage Investment Trust has fallen by 40% this year. As its managers address shareholder concern…
5 Dec 2022

Most Popular

Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
Radiator vs electric heater – which is cheaper?
Personal finance

Radiator vs electric heater – which is cheaper?

We compare the costs, pros and cons of radiators and electric heaters and see which one will help keep your energy bill as low as possible.
28 Nov 2022
State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments
State pensions

State pension errors – why tens of thousands of mothers could be missing out on millions in state pension payments

LCP launches Mothers Missing Millions campaign amid DWP state pension errors.
3 Dec 2022