Ethical investments beat traditional funds during pandemic

EVEN though “green” and other “ethical” funds only account for a tiny share of the world’s investment universe, they have substantially outperformed other assets during the Covid crisis, according to a new study.

According to the Institute for International Finance, its sample of 41 sustainable equity indices – those that use environmental, social and corporate governance (ESG) metrics – showed that three quarters had outperformed their more traditional peers by eight percentage points this year.

“The resilience of ESG equity indices was even more striking during the sharp Covid19 sell-off in risk assets in the first quarter of 2020: 85pc outperformed their broad market counterparts,” said the body which represents the world’s largest banks and funds.

In bond markets, 70pc of ESG indices have outperformed their more traditional counterparts this year, it said.

Although the funds managed using ethical investing principles have tripled since 2015 to $1trn, they only account for 2.5pc of the investment universe. Those numbers could get a boost from the European Commission’s plan to put green investing at the heart of the coronavirus recovery.

The presence of the Greens in government here could boost ethical investing in the State.

Ireland has lagged badly in reducing emissions and the new coalition has pledged to push ahead with a target of cutting greenhouse gases by 7pc annually between next year and 2030.

The proposals have however been criticised for pushing reductions into the second half of decade.

The State started issuing green bonds to fund projects with environmental benefits in 2018.

The National Treasury Management Agency has sold two such issues, the latest in a €2bn auction in 2019 after an initial €3bn sale.

NTMA chief executive Conor O’Kelly (right) said last week there could be more issues.

“It’s attractive, it diversifies our source of funds, so I think that’s something we’d be very open to in the mix of our funding, if green was to increase,” he said at a press conference.

As a result of the hit to the economy from the coronavirus pandemic and business lockdowns, the Government will have to raise more money from financial markets so as to plug a hole in State finances and the NTMA has sold bonds worth €18.5bn so far this year.

Coalition has pledged to cut greenhouse gases by 7pc annually