Sustainable funds hold their own as markets tumble worldwide

A steadier and more sustainable way to invest. That’s how a growing cadre of fund managers pitch their approach, one that considers how companies perform on environmental, social and governance issues. Maybe they’re right.

Many such funds held up as well or better than their traditional rivals during the severe, sudden sell- off after the COVID- 19 pandemic struck. By doing so, these funds, often called ESG investments, rewarded the investors who have been pumping record amounts of cash into the field.

It’s the latest march forward for ESG funds, which once were criticized as a fad that would force investors to settle for worse returns. More recently, they attracted a record $ 10.5 billion in net investment during the first three months of the year, according to Morningstar, even as markets worldwide were melting down.

“ESG funds deliver,” economists at the Institute of International Finance wrote in a recent report.

More than three quarters of ESG stock indexes have held up better than their non- ESG peers so far this year, according to the IIF. They were particularly strong during the worst of the market’s sell- off from February into March when recession worries peaked.

That dovetails with a recent Morningstar report that found ESG funds and strategies lost less money than non- ESG funds during market declines over the last one-, three- and five- year periods.