The US SIF Foundation today released The Rise of ESG in Passive Investments, a report that explores the growth of passive ESG (environmental, social and governance) investing and the debate on the effectiveness of passive versus active ESG funds. The paper draws on publicly available data and insights from the US SIF Foundation research advisory committee and from additional asset manager members of US SIF.
While the vast majority of sustainably invested assets are in actively managed ESG funds, net flows into passively managed ESG funds have in recent years outpaced net flows into their actively managed counterparts. This reflects the growing popularity of both sustainable investing and passive investing, which the report documents.
As interest in passively managed ESG funds has risen, so too have critiques about them. While the report examines these concerns, it also provides feedback from asset managers with passive ESG funds. It concludes with recommended best practices for passive fund asset managers to deepen ESG approaches and impact, including through proxy voting, company engagement, disclosure about their ESG incorporation techniques, impact measurement and field building. The report also includes profiles of four ESG ETFs and four index-based mutual funds that demonstrate a range of approaches to passive ESG investing.
https://twitter.com/US_SIF/status/1288092990460788738
The report is divided into three sections:
“This research paper shines a spotlight on the rapidly growing interest in passive ESG strategies,” said Meg Voorhes, Director of Research at the US SIF Foundation. “The advent of passive ESG funds provides more options to investors seeking sustainable impact, and we encourage these fund managers to make commitments to comprehensive ESG approaches.”
To download the report, click here.
Source: US SIF