Funds that bet on companies that perform better on environmental, social or good-governance criteria are one of the fastest-growing asset classes in the U.S.
More than 140 ESG funds have launched globally this year, with overall U.S. assets in the space growing to nearly $12 trillion—more than a quarter of all U.S. assets under management.
The category has grown so fast that few funds have a five-year track record. But in Bloomberg’s ranking of those that do, some have delivered strong positive returns, a marked contrast to most investable assets in negative territory this year.
The top ranked socially-conscious fund this year, Brown Advisory’s Sustainable Growth Fund, bet on companies that ended up helping it avoid the recent market downturn, including Red Hat and American Tower, up 48 percent and 16 percent year-to-date respectively. The fund invests in “companies that are playing offense and are becoming better because they have sustainable business advantages,” said portfolio manager Karina Funk. The fund’s bet that Red Hat was operating more efficiently than its peers might have been something that IBM also saw when it offered a 54 percent premium for Red Hat in October, Funk said.
For growth-focused Calvert Equity, credit card company Visa was a key driver of momentum in its portfolio with 23 percent return year-to-date, according to portfolio manager Joe Hudepohl. The fund selected the company partially for its good governance, a meaningful investment in data protection and higher-than-average female representation on its board, he said.
Read the full Bloomberg article here