ESMA, the EU’s securities markets regulator, has published a study looking at the potential reasons behind the relatively lower ongoing costs, and better performance, of environmental, social and governance (ESG) funds compared to other funds, between April 2019 and September 2021.
ESMA recently determined
that ESG equity undertakings for collective investment in transferable
securities (UCITS), excluding exchange-traded funds, were cheaper and
better performers in 2019 and 2020 compared to non-ESG peers.
Understanding the cost and performance dynamics of ESG funds is of
particular interest as it may bring insights for the overall fund
industry on how to make funds more affordable and profitable for retail
investors.
ESMA, in today’s article, is looking at some of the potential drivers
behind this relative cheapness, and outperformance, of ESG funds, and
finds several differences between the two categories of funds:
- ESG funds are more oriented towards large cap stocks;
- ESG funds are more oriented towards developed economies; and
- The sectoral exposures also differ between ESG and non-ESG funds.
Even after controlling for these differences, ESG funds remain
statistically cheaper and better performing than non-ESG peers. Further
research is thus needed to identify the other factors driving these cost
and performance differences.
ESMA
© ESMA
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article