Sustainable Reality: Analyzing Risk and Returns of Sustainable Funds

(Morgan Stanley, 2019)


The conclusions of this report are based on independent expert data. The conclusions are not extracted from the ether, anecdotes, non-professional literature written or reviewed by self-declared experts… and presented as the truth by some self-interested, self-absorbed, greedy, ignorant… Fossils.

The study compares the performance data of  UNSDG|SR|ESG funds with traditional funds from 2004 to 2018 using exchange-traded and open-ended mutual funds active in any given year of this period. The total performance of 10,723 funds were analyzed for their total returns net-of-fees, and downside deviation, a metric of risk.

The UNSDG|SR|ESG funds provided returns in line with comparable traditional funds while reducing downside risk and deviation. During a period of extreme volatility, there was statistical evidence that UNSDG|SR|ESG funds were more stable. It would appear that incorporating UNSDG|SR|ESG ethics, goals, principles… into investment portfolios may help to limit market risk in addition to being far superior for humanity and humanity’s planet.

Despite the data of this report, 53% of individual investors still believe that UNSDG|SR|ESG investing requires a financial trade-off. The data of this report shows that this perceived trade-off is a myth. Contrary to what many investors believe, UNSDG|SR|ESG fund returns do not differ from traditional funds. Further, UNSDG|SR|ESG funds may offer a risk reduction that results in more attractive risk-adjusted returns. This should help mobilize the 75% of investors who are interested in UNSDG|SR|ESG investing to act on those interests.