The environmental research firm, Trucost, and RLP Capital, a forward-thinking independent wealth management firm, collaborated to study the effects of ESG analysis in actively managed U.S. equity mutual funds, according to a press release from Trucost. The study found that funds incorporating ESG analysis outperformed traditional funds over 1- and 3-year periods. Further, these funds had smaller carbon footprints, indicating lower exposure to carbon costs.
The study compared the carbon footprints, performance and risk characteristics of the 8 largest traditional mutual funds with the 8 largest responsible funds in several key asset categories. 7 of the 8 responsible funds outperformed the traditional funds, and all 8 had significantly higher risk-adjusted performance over the 3-year period.
While traditional funds use an investment approach that relies solely on traditional financial analysis, responsible funds incorporate both traditional financial analysis and ESG analysis to identify firms with solid financial prospects that demonstrate positive track records with regard to ESG issues, according to Trucost. As part of the study RLP examined over 30 ESG criteria to determine what factors, if any, are incorporated into each mutual fund’s investment process.
To read the full press release please click here.
This is great news for socially responsible investors – do you think this trend will continue and evolve from just a trend to the norm? Discuss!
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