hands holding the earth
Tanya Steinhofer No Comments

In honor of the 51st Earth Day on April 22nd, we thought we’d provide an update on one of our favorite topics, Environmental, Social & Governance (ESG) investing, also often referred to as sustainable investing. Here are several themes:

  1. Continued growth in assets. Sustainable investment funds accounted for approximately 25% of overall US fund flows and attracted a record $51B in net flows in 2020, more than twice the previous record set in 20191. It is estimated that ESG strategies will make up 50% of all managed assets in the US by 2025 (see chart below).

  1. New fund choices. The number of sustainable investment vehicles increased by 30% in 2020, ending the year with a high-water mark of 392 options.
  2. Solid performance. While longer-term studies indicate market-rate returns for sustainable/ESG funds, with slightly less risk than conventional peers, 2020 was a particularly strong year for sustainable fund performance. 75% of stock funds were in the top half of their peer group and 43% were in the top quartile.

Given the strong fund flows, increasing investment fund choices, and solid performance, it seems ESG/sustainable investing is here to stay. RGWM believes it is a better way to invest because it entails considering more data points when evaluating companies than just financial metrics. RGWM clients are increasingly invested in this way, with approximately 80% of our clients and 60% of assets in ESG/sustainable/impact investments. And in honor of Earth Day, we introduced a Fossil Fuel Free fund choice to clients this week.

Source: 1: Morningstar 2020 Sustainable Funds US Landscape Report.