Investing through ESG has been the biggest influence for U.S ETF business's growth at the end of 2019 that has increased 30% from 2018. It also affects the number of ETFs which increased 8% towards 2,302. On 2019, there are also nine mutual funds of ESG in the U.S that outperformed the Standard & Poor’s 500 Index and seven of them has beat their market benchmarks over the past 5 years.
The top performer is Ave Maria Growth Fund ($878 million) followed by Calvert Equity Fund ($3.8 billion) and Putnam Sustainable Leaders Fund ($4.9 billion). These three have posted gains above 35% compared to Standard & Poor’s 500 Index 31.5% with reinvested dividends. Morgan Stanley’s $3.9 billion Global Opportunity Portfolio and Brown Advisory $2.1 billion sustainable growth fund have managed to hold on to the top rank in the five-year period.
Assets managed by 75 retail funds also one of the ESG testimony which has liven up more than 34% to $101 billion last year as socially conscious money managers bet that this sustainable investing will help them to find new opportunities to grow more. The ESG itself is one of the hottest topics at this year on ETF conference due to the action of all investors to finally stop talking about ESG and start to invest on it.
However, ESG funds account for only $20.9 billion in ETF assets which means only 0,4% from $4,5 Trillion that this industry controls. Larry Fink from Blackrock said passionately in his letter that it was time to take climate change and ESG seriously and it has pushed the conversation over the top. On the other side, Ben Johnson from Morningstar said that ESG has a problem where it cannot be inherently scaled. The securities and Exchange Commission seems agree to this statement since the agency has asked ESG providers to give more information to define what actually ESG is. Direct indexing might be the solution because it will allow individual investors to customize portfolios to meet what they want.
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