US ESG funds outperformed by 4.3% in 2020

US sustainable equity funds outperformed traditional funds by 4.3% according to the Morgan Stanley Institute for Sustainable Investing.

The Sustainable Reality study published by the Morgan Stanley Institute for Sustainable Investing found that US sustainable equity and taxable bond funds continued to outperform their traditional fund counterparts on a total return basis throughout 2020.

Median total return for US sustainable equity funds was 4.3% higher than traditional funds and the median total return for US sustainable taxable bond funds was 0.9% higher than traditional taxable bond funds. US sustainable funds also continued to be less risky than their traditional counterparts as measured by median downside deviation.

“The difficult events of 2020 underscored the importance of sustainability concerns and strengthened the rationale for sustainable investing,” said Audrey Choi, Morgan Stanley’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing. “Sustainable funds’ strong risk and return performance during an exceptionally turbulent year further erodes the persistent misconception that sustainable investing requires a performance sacrifice.”

“The U.S. sustainable investing market ended the year on a high note, with record-breaking net inflows in October, November and December,” said Matthew Slovik, Managing Director and Head of Global Sustainable Finance at Morgan Stanley. “Amid this continued growth, analyzing the performance of sustainable investments, and proving their resiliency, is critical to advance the field and to encourage others to invest with an ESG mindset.”