Implications of the Outperformance of Active Sustainable Investing
By Cary Krosinsky and Sahil Mulji
- Although many US states such as Florida[i]and Texas[ii]have been recently passing legislation preventing their pension systems from considering environmental, social, and corporate governance (ESG) factors, active sustainable investors have been financially outperforming over the long term, earning higher returns for their clients while managing tens of billions more dollars on the back of such financial success.
- Other states such as Indiana[iii], Kentucky[iv], and North Dakota[v]considered similar legislation, but are understandably passing on adopting new “anti-ESG” rules out of concern that such laws could reduce the financial returns experienced by beneficiaries.
- Florida, however, has persisted[vi], even though evidence suggests such “anti-ESG”/”anti-woke” rules are likely to negatively impact financial returns.
- To further illustrate this point of pension funds potentially experiencing lower financial returns due to “anti-ESG” legislation, the Sustainable Finance Institute endeavored to look at how sustainability-focused funds have been performing for their beneficiary clients.
- The study focused on active sustainable investors, who aim to maximize financial returns for their clients while prioritizing sustainability. For our analysis we selected active fund managers with over $10 billion in assets under management, more than 10 years of operation, and accessibility to US investors.