Don’t name it a fad. Moral investing is right here to remain
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With billions of dollars flowing into sustainable investing strategies, it’s safe to say it’s no longer a fad.
Investors are pouring cash into funds that use environmental, social and governance criteria to screen the companies they invest in.
Even passive investors are jumping in: There were 534 sustainable index mutual funds and exchange-traded funds globally, accounting for $250 billion as of June 30, according to Morningstar.
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“I think sustainable investing in one form or another has been around for decades,” said Mona Naqvi, senior director, head of North American ESG product strategy at S&P Dow Jones Indices.
She spoke Tuesday at the CNBC Financial Advisor Summit, a day-long virtual conference for financial advisors.
“What we’re seeing this time around is that the flows are gaining momentum,” Naqvi said. Advances in data collection have helped drive ESG innovation.
“You can still integrate ESG, but design an index that looks and feels like the S&P 500,” she said, adding that this has made the strategy more accessible to mainstream investors.
While ESG strategies are gaining momentum stateside, it could be a while before they become as popular as they are in Europe.
In fact, Europe accounts for more than 75% of global assets in sustainable passive funds, according to Morningstar.
The U.S. represents 20% of these assets, up from 13% three years ago, Morningstar found.
The difference in asset growth is driven at least in part by cultural differences between Europe and the U.S. Investors across the pond are less likely to see sustainability as political matter, said Naqvi.
“The materiality of issues like climate change are more established [in Europe], and it’s not seen as a political issue, but rather a scientific one,” she said.