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ESG funds beat non-ESG peers in 3 key sectors

ESG funds have outperformed their non-ESG peers in three major equity markets in 2020, according to research from investment manager and platform Willis Owen.

In its inaugural annual ESG review Wilis Owen found a near doubling of returns compared to non-ESG mandates in the IA Global sector.

On average in the global sector, ESG funds delivered a return of 22.3% this year, versus the IA Global sector average of 13.2%.

ESG funds also outperformed in the UK All Companies sector and UK Equity Income sector, although to a less degree.

The global pandemic has altered the investment landscape in 2020, said Willis Owen, and led to global and domestic-focused ESG mandates outperforming peers, the firm’s data shows.

Adrian Lowcock, head of personal investing at Willis Owen, said the out-performance was due in part to the underperformance of some less ESG-friendly sectors such as oil and gas, financials and airlines but a sustainable focus and governance elements have helped long-term investment performance of ESG funds.

In the global sector, Baillie Gifford’s Positive Change and Global Stewardship funds delivered significant outperformance, with the Positive Change fund returning more than five times as much as the average fund in the IA universe.

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Mr Lowcock said: “2020 was truly the year when ESG funds emerged from the side-lines. The sector has shone on a global basis, with the growing number of options open to global ESG equity managers helping these focused strategies to outperform.

“While the market is still growing, we have seen a real shift in terms of both performance and fund flows, and we expect this trend to continue. The number of funds being launched in this space is likely to continue as groups that don’t have a position or strategy covering ESG look to fill the gaps.”

In the UK it was a tough year for UK mandates which has seen the average strategy lose 9%, however ESG funds outperformed with an average loss of only 5.22%. ESG UK equity income funds also marginally outperformed their non-ESG peers.

Willis Owen’s analysis separated funds by looking at performance over the year and filtering funds with a specific ESG mandate, including Clean Energy, ESG, Ethical, Sustainable and Responsible funds. 

Mr Lowcock said ‘greenwashing’ – green investments which turn out to be less than green – remained an issue.

Global ESG Funds – Top 10

Percentage Return

Baillie Gifford Positive Change

76.13

Baillie Gifford Global Stewardship

63.15

Guinness Sustainable Energy

59.44

Aegon Global Sustainable Equity

51.67

Pictet Clean Energy

40.76

Ninety One Global Environment

36.19

AB SICAV I Sustainable Global Thematic Portfolio I

31.94

Janus Henderson Global Sustainable Equity

29.4

Liontrust Sustainable Future Global Growth 2

28.7

Morgan Stanley Global Sustain

26.56

Sector : IA Global

13.22

Total Return in pounds sterling 31 December 2019 to 2nd December 2020

 

UK All Companies ESG Funds– Top 10

Percentage Return

Premier Miton Ethical C

3.87

Ninety One UK Sustainable Equity

0.81

Royal London Sustainable Leaders Trust

0.45

Liontrust Sustainable Future UK Growth 2

-0.05

ASI UK Responsible Equity

-2.68

Liontrust UK Ethical 2

-3.51

Aegon Ethical Equity

-5.3

BMO Responsible UK Equity 2

-7.84

CFP Castlefield B.E.S.T Sustainable UK Opportunities General

-9.18

ASI UK Impact Employment Opportunities Equity Retail

-9.67

Total Return in pounds sterling 31 December 2019 to 2 December 2020

 


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