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Sustainable Investing Research Suggests No Performance Penalty

Debunks the commonly held belief that sustainable investing has a negative effect on investment performance

Morningstar Editors 01 December, 2016 | 13:42

Morningstar recently published a review of academic research on sustainable investing. The report, “Sustainable Investing Research Suggests No Performance Penalty,” debunks the commonly held belief that sustainable investing has a negative effect on investment performance. For the increasing number of investors interested in sustainable investing, the academic research implies they can receive competitive performance while also addressing their sustainability concerns.

Key highlights of the report include:

• Academic research about the performance of sustainable/responsible (S/R) portfolios, mutual funds, and indexes suggests there is no performance penalty associated with sustainable investing. S/R funds and indexes tend to perform in line with conventional funds and indexes, and, if anything, slightly outperform.

• An analysis of the Morningstar Rating™ for S/R funds globally, from 2002-2016, indicates they perform on par with conventional funds. The rating distribution of S/R funds clusters toward the middle of the distribution compared with the overall universe, but has a positive skew. There are more 5-star S/R funds than 1-star S/R funds and more 4-star S/R funds than 2-star S/R funds.

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