How ESG index funds and ETFs have fared since Paris Agreement
Almost half of ESG index funds and ETFs beat the MSCI All Country World Index.
11th November 2021 14:49
by Tom Bailey from interactive investor
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Almost half of ESG index funds and ETFs beat the MSCI All Country World Index.
This is the third article in a three-part series. Part one looked at investment trust performance since the Paris Agreement was signed in April 2016, and part two examined how open-ended funds have compared to group benchmarks.
Almost half of ESG index funds and ETFs beat the MSCI All Country World Index since the 2016 Paris climate agreement.
With the current COP26 meeting dominating headlines and stoking interest in ethical investments, interactive investor looked at the performance of ESG funds between now and the previous big agreement by world leaders to commit to combating climate change – the signing of the Paris Agreement in April 2016.
- ii COP26 hub: see tips, news, comment and analysis from our experts
- ESG funds have outperformed over three and five years
- Proof from a pro that green investing does not sacrifice returns
- Two UK climate change shares I am backing
To do this, we looked at the performance of passive funds in interactive investor’s ethical investments long list between 22 April 2016 and 31 October 2021. For the list, interactive investor works with industry experts at SRI Services to help confirm and classify relevant funds.
In total, 12 passive funds on the list were in existence between April 2016 and now. In total, it was found that, between the 22 April 2016 and 31 October 2021, five ESG ETFs beat the performance of the global benchmark, the MSCI All Country World Index, which returned 111.7%.
The best-performing passive fund over that period was the iShares Global Clean Energy ETF (LSE:INRG), which returned investors 211.6%. The ETF has been a favourite over the past couple of years, regularly appearing in interactive investor’s monthly most-bought ETFs lists. The popularity of the ETF (and its US counterpart) resulted in the ETF’s index provider expanding the number of constituents owing to liquidity concerns.
BlackRock provided another winning ETF over this period in the form of the iShares Global Water ETF (LSE:DH2O). This ETF returned investors 132.6%.
The Vanguard ESG Dev Wld All Cp Eq Idx also provided strong performance. Often, when it comes to the global and US markets, the result of applying an ESG screen means overweighting tech stocks, often famous US tech names. For a variety of reasons, these stocks have provided very strong performance in recent years.
| Rank | ETF | Return between 22/04/2016 and 31/10/2021 |
| 1 | iShares Global Clean Energy ETF (LSE:INRG) | 211.56 |
| 2 | iShares Global Water ETF (LSE:DH2O) | 132.63 |
| 3 | UBS(Lux)FS MSCI World SRI USD Adis CHF (SIX:WSRUSA) | 131.53 |
| 4 | Vanguard ESG Dev Wld All Cp Eq Idx £ Acc | 115.98 |
| 5 | iShares Dow Jones Glb Sust Scrn ETF $Acc (LSE:IGSU) | 109.71 |
| 6 | UBS(Lux)FS MSCI EMU SRI EUR Adis CHF (SIX:ESREUA) | 92.05 |
| 7 | iShares MSCI Europe SRI ETF EUR Acc EUR (XETRA:IUSK) | 89.99 |
| 8 | iShares MSCI USA Islamic ETF USD Dist (LSE:ISDU) | 89.20 |
| 9 | iShares MSCI World Islamic ETF USD Dist (LSE:ISDW) | 80.16 |
| 10 | Vanguard SRI European Stk £ Acc | 68.30 |
| 11 | UBS(Lux)FS MSCI Pacific SRI USD Adis CHF (SIX:PSRUSA) | 60.22 |
| 12 | L&G MSCI Wld Sclly Rspnb Invmt SRI I Acc | 49.19 |
| Benchmark 1: MSCI ACWI NR USD | 111.69 |
Source: Morningstar
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.