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ESG investing: Funds focused on responsible practices outperform in the long haul, says index compiler

  • Guages like the Hang Seng ESG 50 Index and the Hang Seng Composite index have given better annualised returns than the Hang Seng Composite index
  • Short-term setbacks have been triggered by high interest rates, renewables energy sector challenges and greenwashing scandals

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A man meditates at the West Kowloon Cultural District waterfront. Photo: Sam Tsang
Eric Ng
Investment products with strategies zeroing in on companies’ environment, social and governance (ESG) performance should outperform in the long term, overshadowing the outflows in the near term triggered by high interest rates, renewables energy sector challenges and greenwashing scandals, according to a stock index compiler.

Data collated by Hang Seng Indexes Company has shown that its ESG indices have outperformed benchmark indices by a comfortable margin over the years.

As of the end of last year, the Hang Seng ESG 50 Index posted annualised “excess returns” of 172 basis points over the Hang Seng Composite Index since the base date of 5 September 2014, while the Hang Seng Corporate Sustainability Index gave a yearly surplus of 189 basis points since 2 January 2008.

Both the ESG and sustainability indices prioritise Hong Kong-listed constituents with longer track records. One basis point equals 0.01 per cent.

The Exchange Square where Hong Kong stock exchange (HKEX) is housed in Central. Photo: Xiaomei Chen
The Exchange Square where Hong Kong stock exchange (HKEX) is housed in Central. Photo: Xiaomei Chen

“Generally speaking, ESG indices meticulously consider the sustainability factors of a listed company, potentially resulting in reduced ESG risks,” Gary Chiu, chief market intelligence officer of Hang Seng Indexes told the Post.

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