Money Keeps Pouring Into Sustainable Funds—Even as Performance Lags
Morris F. DeFeo, chair of Herrick's Corporate Department, was quoted in Barron's in an article about the growth in assets committed to sustainable investment funds, in particular environmental, social and governance, or ESG focused funds. The article notes that performance in these funds has straggled and concerns have been mounting that the style will no longer outperform the market. However, the article also notes that some periods of ESG underperformance may be a good thing as it demonstrates that ESG is not a "gimmick" when it comes to investing. Looking at the long-term, ESG performance is holding up.
Investors are also "adopting ESG as a risk-mitigation tool. Indeed, Congress is weighing requiring the Securities and Exchange Commission to make companies more transparent in disclosing ESG risks to investors. Companies are becoming more sustainable as directors feel the heat[.]"
DeFeo explained, "Across the board, they’re getting increased feedback from large institutional investors." In addition, consumers "snapping up" green products ultimately will reshape company results.
Read the full piece in Barron's here. Access may require a subscription.