Gustavo Bernal Torres
The Sustainability Impact of Popular Passive ESG Funds
From Impact Cubed, white paper asks the net impact of passive ESG funds and their performance vis-à-vis tracking error-
The report reaches two main conclusions. First, it argues that passive ESG fund performance can be “patchy”. Indeed, the study found at least three funds had a net negative overall impact, suggesting sustainable investors would have been better off not investing in those funds.
Secondly, investors can find a passive ESG fund with positive impact and lower tracking error. Indeed, although the report notes that “the potential for impact goes up with tracking error”, it also notes that this is not always the case. Moreover, even among the funds with a net positive impact, ESG performance varied four-fold between the ‘best’ and the ‘worst’.
Impact Cubed applied its impact measurement model to 13 popular passive ESG funds: iShares ESG Enhanced, Invesco ESG Screened, L&G ESG Global Markets, ISS ESG Prime, Lyxor ESG Trend Leaders, XTrackers World ETF, Invesco ESG Multi-Factor ETF, iShares World SRI, MS DM Sustainability 200, La Francaise Zero Carbon, MS DM Sustainability Leaders and MSCI Select ex Fossil Fuel.
Source: https://nordsip.com/2021/03/04/study-warns-against-esg-funds-negative-impact/ & https://www.impact-cubed.com/NewsAndPublications