ESG Funds Do Not Have A Performance Penalty

Morningstar, the research provider, has compiled the academic research which shows there is no performance penalty associated with environmental, social, and governance investing to counter the continuing assumption of underperformance.

Jon Hale, head of sustainability research at research provider Morningstar, summarized the findings of academic studies on sustainable investing in a paper this month. He concluded that sustainable/responsible funds and indexes perform on par with comparable conventional funds and indexes, companies with higher ESG scores and ratings can outperform comparable firms in both accounting terms and stock market terms and that a focus on company-level ESG factors, rather than exclusionary screening, can lead to better risk-adjusted portfolio performance.

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