June 15, 2020 Read More →

Morningstar analysis shows green investments outperforming traditional funds

The Guardian:

Environmentalists cheered by huge improvements in air quality during the lockdown – and the collapse in coal power generation – have another reason to celebrate. Even the stock market has gone in their favour.

A detailed number-crunching of environmentally sustainable funds has revealed that they have outperformed traditional funds across the board – beating them during the pandemic as well as during the 10 years up to and including the coronavirus sell-off.

The data, from the global research agency Morningstar, comes amid growing evidence that environmentally focused investing – once pigeonholed by City traditionalists as only for a vegan/hippy minority – is becoming mainstream. This week, Vanguard, one of the world’s biggest fund managers, launched two ethical index funds aimed at UK investors, while Aviva, Britain’s biggest insurer, unveiled a “climate transition” fund.

Morningstar examined 745 sustainable funds and compared them against 4,150 traditional funds, and found they matched or beat returns in all categories – whether bonds or shares, UK or abroad.

“Average returns and success rates for sustainable funds suggest that there is no performance trade-off associated with sustainable funds. In fact, a majority of sustainable funds have outperformed their traditional peers over multiple time horizons,” it says.

Over 10 years, the average annual return for a sustainable fund invested in large global companies has been 6.9% a year, while a traditionally invested fund has made 6.3% a year. The outperformance continued during the coronavirus crisis. “In all but one category considered in the study, sustainable funds outperformed, with average excess returns in Q12020 ranging between 0.09% and 1.83% across categories,” Morningstar says.

[Patrick Collinson]

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