Page 5 - Riverwater 2020 Sustainability Report

2020 SUSTAINABILITY REPORT
SUSTAINABLE INVESTING IN 2020
SUSTAINABLE FUNDS “COMFORTABLY
OUTPERFORMED” IN 2020
Data shows that, despite the extreme volatility and recession of 2020, funds focused “on environmental, social and governance (ESG) factors, across both stocks and bonds, weathered the year better than non-ESG portfolios.” US SIF, Financial Performance with Sustainable Investing.
Further, according to Morningstar’s 2020 Sustainable Funds US Landscape report, sustainable equity funds “comfortably outperformed” in 2020 relative to their traditionally managed counterparts. Three out of four placed in their category’s top half, and 42% of sustainable funds ranked in the top quartile, while only 6% we in the bottom quartile of all funds.
Sustainable Equity Funds: 2020 Return Rank by Morningstar Category Quartile1
Top Quartile 2nd Quartile 3rd Quartile 4th Quartile
42
6
19
Source: Morningstar Direct. Data as of 12/31/2020
While it’s too early for history to prove itself on this topic, it is our belief that the resilience of the business models of companies owned in sustainable equity funds accounted for their outperformance. For example, companies who had in place mutually beneficial employee and supply chain relations experienced fewer disruptions in procurement, manufacturing, distribution, and sale of their products and services.
We believe these sustainable business practices will drive superior performance over the long-term; their effects were clearly evident during the COVID crisis of 2020.
1 Sustainable funds are those that emphasize the use of environmental, social and governance criteria to generate financial return and broader social impact. Data for the past five years shows similar results – the returns of 69 percent ranked in the top half and 41 percent in the top quartile returns. The report also compared the returns of ESG index funds to conventional index funds. Of 23 ESG index funds analyzed, 22 outperformed their relevant conventional index in 2020.
33
2020 % of funds
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