The universe of mutual funds, seen from an ESG perspective

According to MSCI, ESG mutual funds are still only a tiny fraction of the mutual fund universe. With $ 2,000 billion in assets under management, they represented only 4.3% of all mutual fund assets. The majority of equity funds accounted for the lion’s share, representing 3,582 of the approximately 6,600 mutual funds in the MSCI universe. The overwhelming majority of ESG equity funds (77%) are domiciled in Europe, reflecting the region’s leadership in responsible investing.

Perhaps because sustainable investing lends itself more to active management today, MSCI has found more than 15 times more actively managed ESG funds in its universe than index funds. In total, active ESG funds held $ 1.8443 trillion in assets, compared to $ 274.5 billion for index ESG strategies.

Of all the mutual funds it covers, MSCI found that 15.2% were leading ESG funds. Almost two-thirds (63.5%) of its AAA-rated funds were focused on Europe, while funds focused on Asian markets dominated the laggards, which were rated B- and CCC.

“[C]Companies in Asia (mainly operating in emerging markets) are generally in the early stages of implementing sustainability in their business practices compared to their peers operating in Western markets, ”he said. “In other words, within a given industry group, companies operating in Asia, on average, perform worse on key ESG issues compared to other regional peers. “

What ESG issues do mutual funds tend to focus on? A look at fund performance across environmental, social and governance factors can provide a clue. On a scale of 1 to 10 for each pillar, he found that 79.4% of the funds obtained a score between 5 and 7 in the Environment sub-category; 46.3% of funds focused on Europe scored 6 and above, making it the best performing category on this issue.

About Christine Geisler

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