NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

By Paul Bodner and Lucy Kessler

With global stock markets having plunged into bear market territory, the conventional wisdom is that the coronavirus storm sinks all boats. Or does it? While it’s true that equity funds experienced severe losses pretty much across the board, some fared better than others.

According to research by Morningstar, sustainable equity funds did better than their conventional counterparts. In the first quarter of 2020, the returns from more than 200 open-end and exchange-traded funds (ETFs) in the United States with a sustainability theme were over-represented in the top quartile and top halves of their broader category, such as for indexes comprised of large cap value or small cap growth stocks.

Furthermore, Morningstar research also confirms 24 of 26 environmental, social and governance (ESG) index funds outperformed comparable conventional index funds. As described, sustainable investing — otherwise known as ESG investing, socially responsible investing or impact investing — is a strategy that considers environmental, social and governance factors in investment decisions and active ownership.

Phot courtesy of geralt.