ESG Investing: Growing Popularity In Focus

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Biotech Beast


  • ESG investing has experienced a recent surge in popularity.
  • The pandemic has offered an opportunity for ESG to show a strength seen previously during the GFC.
  • Some of the factors that might lead to the sustained growth of ESG fund inflows are considered.

ESG (Environmental, Social, and Governance) investing is socially conscious investing. Why should investors care about that stuff mid-pandemic? This article takes a look at the current state of ESG investing, how are funds holding up, and how do performance trends compare to previous eras.

What is ESG and why consider ESG?

ESG is let's generate a return on our investment without making the world a worse place. The actual aim is financial; companies that engage in questionable practices are a risk to the performance of a portfolio. Despite the financial goals, ESG investing is still commonly viewed as investing with social goals in mind.

The market has had a bit of a rough ride in 2020 although the SPDR S&P 500 Trust ETF (SPY) is currently up about 5%, it was down 30%+ at one point in March. However, even if you're not a tree-hugger, anti-coal, or anti-war, ESG investing can be a way to outperform the market following a downturn. For example, looking back to the era of the GFC, MSCI's EM ESG (ESGE) index did outperform a relevant benchmark.

Looking over the longer term, the performance results of ESG funds seem to vary based on who is performing the analysis and how. The results are hardly unequivocal. It isn't hard to find studies suggesting ESG funds do not outperform. Looking a little more recently, however, there are many analyses suggesting that ESG funds have outperformed or "shined" during the COVID-19 crash.

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Figure 1: Snapshot as of April 10, 2020, of a number of ESG funds outperforming the S&P 500. Similar analyses by different sources note similar trends. The performance of Brown Advisory Sustainable Growth Fund Institutional Shares (BAFWX) continues, up 22% year-to-date at the time of writing, and similarly for the Nuveen Winslow Large-Cap Growth ESG Fund (

This article was written by

Biotech Beast profile picture
Scientist and trader of biotech stock. Focus on trading around events such as trial results and NDA/BLA approvals. Also covering companies in industries regulated by the FDA. Articles present my opinion on stocks, but don't constitute investment advice.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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