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.
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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.
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Spot the Dog: £67bn in underperforming funds revealedAround 137 funds consistently underperformed their benchmark, BestInvest's Spot the Dog report finds. Which funds are in the dog house?
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What does a BP and Shell merger mean for the UK oil industry?BP’s struggles have made it vulnerable to a takeover. Could it merge with Shell to create a British behemoth?
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The unintended consequences of ESG investingEditor's letter Many people are refusing to invest in energy companies, citing "ESG" concerns. But we still need fossil fuels, says Merryn Somerset Webb, and will for years to come. Boycotting the sector is a bad idea.
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Will the rise of ESG investing cause stagflation?Opinion ESG investing is booming. But it may be contributing to today’s stagflation – slower growth and higher inflation – says Tom Traill.
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ESG investing could end up being a classic mistakeOpinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
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Why investors may need to pivot from ESG towards carbon-intensive industriesCover Story Investors have been keen to show their green credentials by shunning carbon-intensive industries. The cost of that virtue signalling is now becoming apparent, says Frédéric Guirinec.
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ESG investing: defence stocks as an ethical investmentAnalysis The definition of what counts as “ESG” investing is getting so vague, says Merryn Somerset Webb, that at some point it will cease to mean anything at all.
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The world’s most powerful asset manager wants you to have your sayAnalysis Under shareholder capitalism, the owners of the companies the big fund managers invest in are us – yet our voice is rarely heard. Now one asset manager, Larry Fink of Blackrock, could be about to give us a say. Merryn Somerset Webb looks at what he's proposing.
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Are ESG funds holding the right companies?Editor's letter A lot of ESG fund managers tend to plump for “techy stuff” in their funds. But that's a lazy approach, says Merryn Somerset Webb.
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What lies behind the returns from ESG investing?Analysis Today’s mantra is that you don’t have to sacrifice performance if you own only ESG stocks. Yet that’s not logical
