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How ESG ETFs Have Performed in the Sell-Off

Can screening for sustainable funds protect you in a stock market sell-off? Morningstar analysts look at the numbers

Briegel Leitao 13 May, 2020 | 9:00

As coronavirus made its way westward in recent weeks, the virus has caused one of the worst market downturns since the Global Financial Crisis more than a decade ago. Economic growth has come under serious threat as global supply chains have ground to a halt and the outlook for business deteriorates.

With many new launches over the past few years, funds with sustainable or ESG mandates have provided an attractive opportunity for investors looking to gain exposure to companies better aligned with their sustainability preferences and values. But as most of these strategies have relatively short and unscarred track records, they haven’t been tested during market corrections before. The recent spate of market turbulence has created an opportunity for many of these funds to be truly tested on their merits.

Here, we look at the performance passive exchange-traded funds in the third week of February – the week that marked the beginning of the major falls on developed stock markets. We compared rolling monthly returns up to March 20 of sustainable or ESG ETFs available in four popular Morningstar categories with the returns of low-cost non-ESG ETFs to see how each fared.

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About Author

Briegel Leitao  is Associate Analyst of Passive Strategies at Morningstar UK

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