Stocktake: ESG funds no longer a ‘bull market luxury’

Environmental, social, and corporate governance (ESG) funds “are going from virtue signalling to value signalling”, according to a new survey of money managers controlling almost €2 trillion of assets.

A majority (52 per cent) of respondents to the Amundi/Create Research survey said their ESG investments performed better during the Covid-19 crisis, 45 per cent said performance was the same, while only 3 per cent said ESG stocks underperformed.

ESG is no longer peripheral to pension portfolios: 80 per cent said ESG funds accounted for more than 20 per cent of their portfolio, while half reported a share of more than 30 per cent.

Notably, 82 per cent expect to increase ESG allocations over time, citing the likelihood of major physical disasters such as wildfires, "spectacular" corporate bankruptcies due to governance failings and major policy initiatives in Europe and in the United States under Joe Biden.

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Consequently, ESG is “no longer seen as purely a bull market luxury”. As one respondent put it: “Living through the pandemic is like experiencing the climate crisis with your finger stuck on the fast-forward button.”