Sustainable investing is on a tear.
According to Morningstar research, sustainable investment funds, which the research firms defines as those that use environmental, social and corporate governances (ESG) criteria as measurements for scoring the societal impact of investing in a public company, saw record flows of $5.5 billion in 2018.
Last year marked the third consecutive year of record flows to ESG-premised mutual funds, which increased 50% to 351 offerings in 2018.
DWS Group Inc., the asset-management business of Deutsche Bank AG , recently raised $843 million in a single day for a new fund that tries to invest in the best corporate citizens in the U.S.
It was one of the most successful exchange-traded-fund debuts of all time, and especially noteworthy in the slow-growing corner of the market devoted to responsible investing.
For years, asset managers have been trumpeting a new dawn for strategies that deliver competitive returns along with a clear conscience. In the past year alone, firms including Vanguard Group, Goldman Sachs Group Inc. and BlackRock Inc.’s iShares have introduced more than a dozen ETFs that use environmental, social and governance scores to pick stocks and bonds.
But investors have been slow to buy into so-called ESG funds. The triumphant inaugural run of DWS Group’s Xtrackers MSCI USA ESG Leaders Equity ETF may signal a step change in investor participation.
CFA Institute consistently monitors key debates and evolving issues concerning the role and application of environmental, social, and governance (ESG) information in the investment management process. More thorough consideration of ESG fac- tors by financial professionals can improve the fundamental analysis they undertake and ultimately the investment choices they make.
CFA Institute is specifically focused on the quality and comparability of the ESG information provided by corporate issuers and how to integrate various ESG factors into the investment selection process.
The positions below reflect the organizational views of CFA Institute and are intended to guide understanding of ESG.