Are ESG stocks really outperforming?

If ESG stocks outperform the market in Europe for no other reason than those investors preferentially buy high ESG stocks as part of an ethical investing wave and thereby drive prices up, then we might expect the same to happen in the US once that wave builds on the US side of the Atlantic.

But these regional differences do not indicate a bubble. ESG may have had its start for ethical and moral reasons, but it has been incorporated into mainstream investing and is now an attribute of stocks, much like a factor, that can form part of an investment strategy.

Damian Handzy is head of research and applied analytics and James Monroe is a senior consultant at Investment Metrics