Despite the scepticism and remembering that ESG investing is predicated on the consideration of financial – as well as ethical – metrics, the data suggests that responsible investing does not come at the cost of returns. On the contrary, across the responsible investing spectrum, and across different markets and asset classes, responsible investments either match or outperform traditional investments on a risk adjusted basis.

Respected financial ratings and analytics firm Moody’s wrote on February 23, 2021, that, ‘Environmental, social and governance (ESG) themed investments have become one of the best performing investment categories in recent years, paving the way for continued growth of this strategy.’²⁶

A comparison of traditional equity indices and socially responsible investment indices reinforces this point.

The MSCI KLD 400, which was founded as the Domini Social Index, was established in 1990 and consists of 400 companies that meet rigorous standards for environmental excellence and social responsibility. Over the past 30 years, it has tracked performance of these companies against the S&P 500. As can be seen below, the social index has consistently outperformed traditional stocks for the past 25 years. And this gap continues to grow.