Another way of looking at the performance equation is from a risk management perspective. To the extent that companies who don’t exhibit good ESG behaviours are more at risk of falling consumer demand, reputational damage, or even financial penalties, is there a corresponding performance penalty paid by these companies?
One study estimated the performance drag for companies who strongly violate ESG norms to be a market underperformance of around 3.5% per annum29.
In Australia, 10 years performance data released by the RIAA30 shows responsible investment funds matched or outperformed ‘mainstream’ funds across most time frames and asset classes.
Note: Average performance of responsible investment ends was determined using the asset-weighted returns (net of fees) reported by survey respondents over one, three, five and ten-year time horizons and compared to the mainstream fund performance from morningstar DirectTM.
Researchers find that ESG investing may benefit consultants more than investors, Simon Moore, forbes.com, April 2021.
Responsible Investment Benchmark Report Australia 2021, Responsible Investment Association of Australasia
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