ESMA study looks at reasons for lower costs in ESG funds
The European Securities and Markets Authority (ESMA), the EU’s
securities markets regulator, has published a study looking at the
potential reasons behind the relatively lower ongoing costs, and
better performance, of environmental, social and governance (ESG)
funds compared to other funds, between April 2019 and September
2021.
ESMA recently determined that ESG equity undertakings for
collective investment in transferable securities (UCITS), excluding
exchange-traded funds, were cheaper and better performers in 2019 and
2020 compared to non-ESG peers.
Understanding the cost and
performance dynamics of ESG funds is of particular interest as it may
bring insights for the overall fund industry on how to make funds more
affordable and profitable for retail investors.
ESMA, in
today’s article, is looking at some of the potential drivers behind
this relative cheapness, and outperformance, of ESG funds, and finds
several differences between the two categories of funds: ESG funds are
more oriented towards large cap stocks; ESG funds are more oriented
towards developed economies; and The sectoral exposures also differ
between ESG and non-ESG funds.
Even after controlling for
these differences, ESG funds remain statistically cheaper and better
performing than non-ESG peers. Further research is thus needed to
identify the other factors driving these cost and performance
differences.
Further information:
Solveig Kleiveland
Senior Communications Officer Tel: +33 (0)1 58 36 43 27 Email:
[email protected] europa. eu