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Morningstar: ESG doesn't thrive in all market environments

Number crunching in Morningstar's global quant laboratory indicates that ESG in itself isn't a source of alpha.
"ESG funds do not target specific factor exposures, and it's difficult to maintain factor exposures unless you're really targeting them intentionally," says Michael Manetta, quantitative research manager at Morningstar in Chicago. | Photo: M. Spencer Green/AP/Ritzau Scanpix & PR / Morningstar
"ESG funds do not target specific factor exposures, and it's difficult to maintain factor exposures unless you're really targeting them intentionally," says Michael Manetta, quantitative research manager at Morningstar in Chicago. | Photo: M. Spencer Green/AP/Ritzau Scanpix & PR / Morningstar
by SØREN RATHLOU TOP

While ESG funds in general outperformed the broader market significantly in 2020, just 24 percent of Morningstar's ESG-screened indices beat their broad market equivalents in the first quarter of 2021.

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