Sustainable funds have outperformed their traditional peers in the first eight months of 2020 by up to 20 per cent, reveals a major new study.

Funds that invest using environmental, social and governance (ESG) principles have, on average, withstood the market turmoil caused by the Covid-19 pandemic far better than non-sustainable funds, according to the research by TrustNet.

The numbers

The gap between ESG and non-ESG funds is strongest in the IA North America sector, where it is close to 20 per cent. Brown Advisory US Sustainable Growth has made 26.73 per cent over 2020 so far, putting it in the top quartile of its peer group.

Meanwhile, the average ESG fund in the IA Global sector has made a 10.10 per cent total return up to August this year, while non-ESG funds have averaged a more modest 4.09 per cent.

Other ESG funds in the top quartile of this sector include Pictet Clean Energy, Liontrust Sustainable Future Global Growth, Janus Henderson Global Sustainable Equity and Rathbone Global Sustainability.

Closer to home, the 19 ESG funds in the IA UK All Companies sector have weathered the coronavirus storm better than their conventional rivals with an average loss of 14.45 per cent. Non-ESG funds in this peer group have dropped by an average of 17.30 per cent.

Outperforming ESG funds here include Royal London Sustainable Leaders Trust (down 1.82 per cent), Ninety One UK Sustainable Equity (down 4.91 per cent) and Liontrust Sustainable Future UK Growth (9.10 per cent).

It comes as Tribe Impact Capital, the UK’s first impact wealth manager, has reported a particularly strong performance of its sustainable funds in 2020. Its medium risk bespoke model portfolio has outperformed by more than 15 per cent since November 2016, compared to the ARC (the wealth manager benchmark).

Covid-19 turmoil

More than half of this outperformance was in the first half of 2020 through Covid-19 related market turmoil.

Chief Investment Officer Fred Kooij said the portfolio has benefited from significant growth in three sustainable investment sectors; healthcare stocks, sustainable food producers and UK social housing.

Recent research by global funds network Calastone suggests that investment into global funds is being driven by ESG. Over the last year, one-third of the money going into global funds has ended up in those focused on ESG investing.

Full article.