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Explainer | ESG investing: what you need to know and how smaller ETFs outgun BlackRock, Vanguard with sustainable screening and benchmarking
- ESG-themed funds more than doubled to US$51.1 billion in the US last year, nearly tripled to US$36.7 billion in Asia ex-Japan in the year to March 2021
- Some ETFs managed by smaller funds have outperformed S&P 500 and ETFs managed by titans like BlackRock and Vanguard
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Why you can trust SCMP
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Sustainable and responsible investing is gaining momentum globally. The money flowing into funds that invest on such non-traditional criteria has eclipsed one record after another in recent years, yielding emphatic returns in some cases for investors along the way.
Assets focused on companies that strive to protect the environment, promote good social values and adhere to good corporate governance, or ESG in short, have climbed in four straight quarters, according to fund tracker Morningstar. They amounted to US$185 billion in the first quarter this year, driving the total size to almost US$2 trillion globally.
In the US, ESG-themed funds more than doubled to US$51.1 billion in 2020. In Asia excluding Japan, managed sustainable fund assets have almost tripled to US$36.7 billion in March 2021 from a year earlier.
Here’s what asset owners need to know about ESG investing and its processes.
Does ESG investing enhance returns for investors?
Such dedication has paid off, especially for smaller funds, based on studies by universities and investment banks.
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