Environmentally sustainable funds have outperformed traditional investments—not only during the economic crunch brought on by the COVID-19 pandemic, but in the 10 years previous, according to new analysis by global research agency Morningstar.
“Average returns and success rates for sustainable funds suggest there is no performance trade-off associated with sustainable funds,” Morningstar concluded, based on a review of 745 sustainable and 4,150 traditional funds. “In fact, the majority of sustainable funds have outperformed their traditional peers over multiple time horizons.”
The news “comes amid growing evidence that environmentally focused investing—once pigeonholed by City [of London] traditionalists as only for a vegan/hippy minority—is becoming mainstream,” The Guardian writes, in a post republished by the Institute for Energy Economics and Financial Analysis. “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.”
The research for the Morningstar report determined that sustainable funds “matched or beat returns in all categories—whether bonds or shares, UK or abroad,” the paper adds, with 6.9% annual returns over 10 years compared to 6.3% for traditional investments. During the pandemic, “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 stated