ESG
InvestingDefinition
Environmental, Social, Governance investing. Screens companies on sustainability, labor practices, board diversity, etc. Critics argue it sacrifices returns for ideology; supporters argue good ESG correlates with lower long-run risk and better governance.
The data: ESG funds have had mixed performance. They tend to underweight oil/gas/tobacco (which sometimes hurt performance) and overweight tech (which sometimes helped). Net effect roughly washes out over long periods.
The data: ESG funds have had mixed performance. They tend to underweight oil/gas/tobacco (which sometimes hurt performance) and overweight tech (which sometimes helped). Net effect roughly washes out over long periods.
Example
ESGU (iShares ESG Aware MSCI USA): tracks MSCI ESG-screened US stocks. 2018-2024 return roughly matched the S&P 500 — slight underperformance during the energy boom (2022), slight outperformance during tech rallies.