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Recently ESG funds have gained popularity. From their stance on sustainable, good companies that also provide you with returns, these funds have got the attention of the average investor and are poised to continue to grow in 2020 and beyond.
In the first quarter of 2020 10/12 ESG funds surveyed outperformed the S&P 500 and all 11 of the non-US ESG funds outperformed the S&P benchmark as well. However, why are these funds doing better than their competitors during the coronavirus pandemic? Popularity appears to be the main reason as Millenials who make up ¼ of the US population are flocking to these funds, pushing up their price and/or value.
Renewable Energy in the battle to fight climate change has grown tremendously in the past few years as wind and solar power seems poised to replace the oil and gas industry. Companies like Tesla, Bloom Energy, and Nikola with their focus on renewable and electrical products have exploded their share prices. Tesla’s share price has crossed $1,450 and Nikola has doubled in price since its IPO in June.
ESG companies have started to hold managers accountable. Shareholders are often given the opportunity to vote these directors out each and every making them much more cognizant of the goals of their shareholders. This makes these companies more likely to perform admirably and care about the issues that their shareholders care about, positive returns, and a positive impact on the world.
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