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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Should you bet on US stocks?You don’t have to be bearish on US stocks to worry that they are now such a large share of global indices
-
Warren Buffet invests in Domino’s – should you buy?What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
-
Is India still a good investment?India's long-term story is compelling, but after a spectacular bull run, warning signs are starting to show. Is investing worth the risk?
-
4Imprint makes a strong impression – should you buy?4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
-
Are vintage Ladybird books valuable?Collectables Keep an eye out for vintage Ladybird books at the car boot sale or on online marketplaces like eBay. You could find gold dust between its hard covers
-
Invest in Glencore: a cheap play on global growthGlencore looks historically cheap, yet the group’s prospects remain encouraging
-
Alchemy: gold for the gulliblePeople have fallen for alchemy for centuries, including Isaac Newton and Johannes Kepler. They should have known better
