Historic Returns by Asset Class (1985


In 2021, investors will continue to focus on record levels in the areas of environmental, social and governance (ESG).

In the first quarter of 2021, global ESG fund inflows exceeded and reached the last four consecutive quarters $ 2 trillion. But while ESG is rapidly gaining momentum, the CFA Institute shows that 33% of professional investors surveyed feel they don’t have enough knowledge to consider ESG issues.

To help investors understand this growing trend, this infographic from MSCI offers a fact check on five common ESG myths.

1. “ESG is at the expense of investment performance”

Fact check: Not necessarily

Globally, ESG-focused companies have not only achieved higher returns, but also stronger earnings growth and higher dividends.

Returns according to ESG ratings Earnings growth * Active return ** Dividends and buybacks
Top group 2.89% 1.31% 0.28%
Middle tier 1.35% 0.12% -0.02%
Lower level -9.22% -1.25% -0.05%

Source: MSCI ESG Research LLC (December 2020)
* Contribution of earnings growth and dividends / buybacks to active return
** Active return is the additional gain or loss compared to the respective benchmark

In fact, a separate study by the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors talk about ESG, but don’t invest in it”

Fact check: Not correct

Global ESG assets under management (AUM) in ETFs increased from $ 6 billion in 2015 to $ 150 billion in 2020. In just five years, the ESG-AUM has accelerated 25 times.

Today, asset managers focus on the following five key topics:

Top ESG topics Affected Assets Growth in affected assets (2018-2020)
Climate change / CO2 emissions $ 4.18T 39%
Anti-corruption $ 2.44T 10%
Board matters $ 2.39T 66%
Sustainable natural resources / agriculture $ 2.38T 81%
Manager salaries $ 2.22T 122%

Source: US SIF Foundation (Nov. 2020)

Meanwhile over 1,500 Shareholder resolutions focusing on ESG-related matters were tabled between 2018 and 2020. Not only are investors turning to ESG investing, they are also placing higher demands on corporate responsibility.

3. “ESG investment strategies eliminate entire sectors”

Fact check: Not necessarily

First, not all ESG investment approaches are exclusive.

For example in North America roughly 51% of the ESG ETFs used an ESG integration approach as of December 31, 2020. With an ESG integration approach, ESG risks and opportunities are analyzed with the aim of supporting long-term returns.

In comparison, value-and-screening approaches, which made up over 22% of ESG ETFs in North America, can weed out certain business activities like alcohol or tobacco or sectors like oil and gas.

Percentage of the ESG type integration Values ​​& Screens Thematically impact
North America 50.9% 22.5% 20.7% 5.9%
Asia 57.8% 34.6% 3.8% 3.8%
Europe 30.8% 60.6% 8.6% 0.0%
Australia 28.6% 71.4% 0.0% 0.0%

Source: Refinitiv / Lipper and MSCI ESG Research LLC, as of December 31, 2020 (MSCI Feb. 2021)

Second, companies are rated on a sector-by-sector basis, identifying ESG leaders and laggards within each sector versus competitors. In other words, ESG doesn’t mean eliminating sector exposure. Instead, investors can choose from a number of companies based on the quality of their ESG ratings.

4. “ESG investing is only for millennials”

Fact check: Not correct

Although ESG is popular with millennials, ESG investing is driven by the entire investor population. In 2019, a study found that 85% of the general population expressed an interest in investing in ESG.

Interest in sustainable investing Average population Millennials
2019 85% 95%
2015 71% 84%

Source: US SIF Foundation (Nov. 2020)

Sustainable investing goes way beyond millennials – ESG disclosure is fast becoming a requirement for key industry players such as institutional investors and publicly traded companies.

5. “ESG investments are here to stay”

Fact check: True

Climb 28% In 2020 alone, over 3,000 signatories committed to the UN Principles for Responsible Investment. In the first quarter of 2021, 313 global organizations and 33 asset owners were added.

UN PRI growth Number of signatories * AUM represented
2020 3,038 $ 103.4T
2019 2,370 $ 86.3T

Source: UN PRI
* As of March 2020

The availability of ESG investments is central to the growth of ESG. ESG investing has become more accessible – which has not always been the case. Over the past decade, the number of ESG ETFs worldwide has been 46 to 497.

Why the facts matter

As ESG investing continues to play an even bigger role in investor portfolios, it is important to focus on data rather than prevailing ESG myths that are not backed by facts.

With the recent momentum in investment returns and the advent of ESG, data-driven evidence empowers investors to build more sustainable portfolios that are better aligned with their investment objectives.


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