Impact investing appears to be heading for a very good 2019. But don’t thank any gods of virtue — give credit to technology companies.
Boosted by tech-heavy portfolios, nearly half — 48% — of large-cap sustainable funds performed better than the S&P 500 through November, according to data from Morningstar. That’s compared with 26% for all of large-cap funds.
Through the end of last month, the S&P 500 had gained 25%. By comparison, Vanguard’s ESG US Stock ETF whose holdings are vetted for environmental, social and corporate governance criteria had gained 28%.
That exchange-traded fund’s top holdings? Apple, Microsoft, Amazon and Facebook.
Big banks and financial firms have been adding so-called responsible investing products while at the same time there’s debate whether investors should seek profits, a greater good, or a combination of both. About half of the European investors queried in a September NN Investment Partners survey said they were hesitant to dive into impact investing. Still, Bank of America and others report increasing demand from retail clients for opportunities to put their money into funds with a social impact.
Global business groups are also pushing people to invest beyond pure profit. Davos summit founder Klaus Schwab, in a document prepared in advance of the January World Economic Forum in Davos, calls for a focus that includes “stakeholders” including surrounding communities and “society at large, rather than focus on only on “shareholders” as he did 50 years ago.
With events from Amazon fires to teen protests focusing attention on the need to address issues like global warming, investors are pouring money into ESG funds. The amount of money going into socially-responsible funds more than tripled to $17.7 billion through November compared with $5.5 billion for all of 2018, according to Morningstar figures reported by the Wall Street Journal.
- The World Economic Forum’s annual meeting of world and business leaders next month will cover such topics as governance, sustainable growth, cybersecurity and climate and environmental issues.