How ESG Funds Have Been Outperforming the Market

The coronavirus pandemic has had a devastating impact upon the world’s financial markets, but there is one sector that has fared better than most: funds that are focused on environmental, social and governance (ESG) strategies. These funds look to invest in quality companies that are also socially responsible, and that they are doing well is not by accident, nor should it be considered a short-term trend.

While you have a myriad of good investment options available to you, ESG investing, which has been growing in popularity in recent years, is one of the more interesting and promising ones. This article describes what ESG investing is, how and why ESG funds are currently outpacing other sectors, their future outlook and how you can take advantage of this trend.

What Is ESG Investing?

ESG investing is different than traditional forms of investment in that the focus of investors goes beyond financial factors such as growth potential and risk. These additional factors relate to whether a company’s activities are having a positive impact upon the world. This impact can take shape in various forms, such as environmental sustainability, how it treats its customers, employees and community, and how it is structured to both encourage openness and prevent corruption.

In essence, investors are looking for companies that not only perform well but also act well.

Prior to the coronavirus epidemic, ESG funds had not only been growing tremendously, they had also been less volatile than standard funds.

How and Why ESG Funds Have Lately Been Outperforming the Market

During the coronavirus pandemic, the performance of ESG funds has been dramatic. In March of this year, Bloomberg looked at close to 3,000 ESG funds. They found that about 400 of them produced a positive return for the year even before the stock market began to rebound. Close to 50 of these even managed to produce gains of 10% or more.

Although Bloomberg also found that the average ESG fund at the time had lost 12.2% since the beginning of the year, this represented about half the decline of the S&P 500 over the same period. An analysis from Morningstar further backed these findings. They found that 24 of the 26 ESG funds that they looked at performed better than comparable non-ESG funds during the crisis.

Numerous factors can be credited for this performance. This includes better risk management among the companies within the funds’ portfolios, less exposure to companies related to or reliant upon fossil fuels, and a general interest among investors to support companies that are doing their part in trying to heal the world.

The Outlook for ESG Funds

Some may be concerned with how ESG funds will perform once the pandemic is over, especially as, in the past, these funds have only outperformed standard funds in the aftermath of crises and during years in which the stock market was experiencing a downturn. But we may find ourselves in a world that has fundamentally changed forever.

Some now see ESG investing as a mega trend. Steen Jakobsen, who is the chief economist of Saxo Bank, has said, “For the first time since World War II we sense a shift in which climate and the environment — not growth — will become the priority of governments and their citizens, as shortages of food, clean water and air become existential questions.”

How You Can Take Advantage of the Trend Toward ESG Investing

You can take advantage of the trend toward ESG investing by selecting from the large number of ESG funds that are available. They come in the form of both mutual funds and exchange-traded funds (ETFs), with some being passive index funds that build their portfolios based on established ESG rankings and others being actively managed.

There are also many types of ESG funds to choose from. There are broadly diversified funds as well as those that focus on either large or small companies. There are further funds that invest in foreign countries and those that operate specifically in emerging markets.

You can additionally invest in ESG funds that focus on specific interests, such as climate change or the conservation of important resources.

Summary

There are very real reasons why ESG funds are performing better than other sectors during the pandemic. What’s more, there are good reasons to believe that this trend will continue even after the current crisis has subsided, making it an attractive investment option to consider.



*** BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated September 13, 2020

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

ONE of this year's Motley Fool Stock Picks Has Already quadrupled, ONE has tripled, and another TWO Have Already Doubled in just 8 months of of 2020!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's almost 5 years, 55 months and 110 stock picks. As of Friday, September 11, 2020 the Motley Fool's January 2 stock pick (TSLA) is up 333%, their March 19th pick (ZM) is up 209% in just 6 months, and another two have more than doubled. In addition, 6 of their 2019, 8 of their 2018, 8 of their 2016, 9 of theire 2017 and 13 of their 2016 picks have also doubled. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 135%. That beats the SP500 by an average of 95%. And that's even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.

  • CrowdStrike (CRWD) -- June 4, 2020 pick is already up 32%
  • Shopify (SHOP) – April 2, 2020 pick and it is already up 164%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 209%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 41%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 333%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 82%
  • Netflix (NFLX) picked November 21, 2019 and it is up 54%
  • Trade Desk (TTD) picked November 11, 2019 and up 117%
  • Zoom Video originally picked Oct 3 and it is up 398%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 105%

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. They also claim that since inception, their average pick is up 529% and now we believe them. You sure don’t want to risk missing out. Many analysts are saying that we have passed the bottom of this COVID crisis and stocks will recover quickly. So make sure you have the best stocks in your portfolio.

Normally the Fool service is priced at $199 per year but they are currently offering it for a NEW SUBSCRIBER DISCOUNT of just $99/year if you click this link

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



Leave a Reply

Your email address will not be published. Required fields are marked *