2020 was a great year for ESG funds and sustainable finance

The concept of sustainable investing has been making headlines in recent years, but 2020 seems to be an important turning point. At the very least, ESG funds can certainly no longer be seen as a mere niche market.

Here are a few highlights of the record year for sustainable funds.

For an introduction to ESG funds, look up our previous blog “Responsible investing: how to reconcile performance and personal values”.

Investors are paying attention

Earlier this year, BMO Global Asset Management conducted a survey with Canadian investors. More than three-quarters (78%) of high income and high net worth investors said they had a favourable bias towards investments that are subject to higher environmental, social responsibility and governance standards.

Although just under a quarter of them (22%) said they had already invested in this type of fund, this percentage is expected to increase by the end of 2020.

Promising results

It’s one thing to speak out in favor of ecological and ethical concerns, but it is another to take concrete action. In 2020, investors’ actions seem to be catching up with their good intentions.

According to Morningstar, inflows into sustainable funds for the first quarter of 2020 exceeded those of the entire previous year. As a result, the market is responding to stronger demand. In Canada, the quantity of ESG Exchange Traded Funds (ETFs) increased by 50 since the beginning of the year.

When it comes to returns, ESG investment is second to none for the moment. The turmoil in financial markets in the spring has actually been milder towards sustainable investing. According to Morningstar, 24 out of 26 sustainable index funds outperformed their peers in the wake of last March’s crash.

Funds to watch

The 3 ESG funds primarily used at MCB Group have had excellent results.

The following data is as of November 23rd.

The BMO Sustainable Opportunities Global Equity Fund uses fundamental, environmental, governance and social data analysis to identify high quality companies with strong management and favourable valuations. For example, the fund does not invest in securities of issuers involved in the exploration, processing, refining or distribution of coal, oil or gas. Its return for the year ended November 23 is 19.35% (26.43% in 2019).

The Mackenzie Global Environmental Equity Fund (Global Environmental Equity) has a return of 40.56% to date. This is an excellent performance compared to its benchmark, the MSCI All Country World Index, which has returned less than 10% as of the same date.

Finally, the NEI Environmental Leaders fund is heading towards a similar year to the previous one with a return on sales (YTD) of 19.42% (20.88% in 2019).

Investors need to be better informed

According to a report by Pollara Strategic Insights in partnership with the The Investment Funds Institute of Canada (IFIC), only half of mutual fund investors and 62 per cent of exchange-traded fund (ETF) investors say they are “very knowledgeable” or “somewhat knowledgeable” regarding sustainable investment issues. Which is quite normal given how relatively recent these concepts are.

Fortunately, the MCB Group has the expertise to help you! Don’t hesitate to get in touch with us and find out how it’s possible to align your investments with your environmental and social values.

Need advice on how to better understand ESG funds and invest in sustainable finance? Make an appointment with an MCB Group advisor.