Yet, they often charge full active fees. With increasing passive ESG fund launches, it seems inevitable that fees will start to come down if alpha generation is not a central goal.
In our experience, there is no short answer for clients when it comes to navigating responsibly managed funds, suggesting that the sector remains early stage.
If fund returns are compromised, is doing good an acceptable reason to have reduced long-term returns? Probably. But these are questions for clients to consider.
For now, the evidence is not strong that ESG strategies, in aggregate, can evidence excess returns.
Rory Maguire is managing director, UK of Fundhouse