ESG funds

The criteria and emphasis will differ widely across the market. For example, the E factor is much more important for mining and energy companies which face environmental and emissions issues than it is for banks. Social factors are more relevant to the retail and fashion sectors, where pay can be low and working conditions can be difficult. In financial services, good governance is the overriding priority, given the risks that have led to banking crises.

When creating ESG funds, analysts will typically use a vast range of data sources to look at ESG factors, from company reports and general market information, to research from bespoke data providers, or official bodies such as the UN. Most asset managers and financial institutions now have in-house ESG teams specifically looking for sustainability rather than more general financial factors.

Research has shown that the use of financially material ESG factors in security selection leads to better-informed investment decisions and has become increasingly important. Companies with a lower carbon footprint, for example, would face lower regulatory or societal risk than a polluter, and so its shares should be less volatile over time.

ESG funds are growing in popularity among investors who want a reputation for cutting global warming and contributing to human development, without compromising on financial returns. Robeco offers a broad range of ESG funds, labeled as Article 8 or Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

See also