Coronavirus Market Volatility Did Not Dissuade ESG Demand | ETF Trends

Sustainable investing like those that track environmental, social, and governance, or ESG, principles have attracted more attention, and the latest trends show that the coronavirus has not put a dent in interest for these socially responsible investments.

“Research suggests that even during a pandemic and extreme market volatility, investors continue to be interested and swayed by ESG information. In other words, interest in ESG investing is not going anywhere, and investment professionals would be well-served by incorporating it into their practices,” Samantha Lamas, Behavioral Researcher at Morningstar, said in a note.

Morningstar’s director of sustainability research Jon Hale also noted in his Sustainable Funds U.S. Landscape Report that many “companies started off 2020 by issuing significant commitments to sustainability.” Meanwhile, asset flows into sustainable funds surged fourfold in 2019 alone and continue to attract record inflows so far this year. This has helped stave off fears that the ESG-theme may have been a passing fad or that investors would ditch the investments when the going got tough.

In its latest survey of investors who were setting up a retirement account framework during the beginning of the extreme market volatility caused by the Covid-19 pandemic, their choices showed that investors seemed to be influenced by a fund’s sustainability rating when making asset-allocation decisions and that identity priming isn’t needed to encourage people to invest with sustainability in mind.

The survey results showed that investors who had access to Morningstar fund options’ ESG information increased the average sustainability rating of their portfolios by a statistically significant amount compared with those who did not receive ESG-related information.

The researchers also found that the investment allocations in those with ESG information on fund options were less correlated with returns overall, which indicated that participants may have focused less on returns when they made their investment selections and paid greater attention to the global impact from their investment decisions.

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