Good News for Sustainable Investors: European ESG Funds Now Cheaper Than Conventional Options

European investors seeking to align their portfolios with environmental, social, and governance (ESG) principles can rejoice. A recent report by Morningstar Sustainalytics revealed that ESG funds in Europe are now, on average, less expensive than their conventional counterparts. This trend reflects a significant shift over the past decade, driven by a surge in ESG investment strategies and increased competition within the sector.

The report analyzed over 110,000 share classes across more than 37,400 funds in Europe. It focused on six of the most popular Morningstar categories, including Global Large-Cap Blend Equity, Europe Large-Cap Blend Equity, US Large-Cap Blend Equity, Global Emerging Market Equity, Europe Corporate Bond, and Other Bond groups.

Here's a breakdown of the key findings:

• Cost Advantage for ESG: The average asset-weighted representative cost for ESG funds in the studied categories sits at 0.83%. This compares favorably to the 0.90% average cost recorded for conventional funds within the same categories.

• Shrinking Cost Gap: The cost differential between ESG and conventional funds has narrowed considerably over the past decade. This trend is likely due to the growing popularity of ESG investing, which has spurred the development of new, more cost-effective ESG fund strategies.

• Competition Heats Up: As more asset managers enter the ESG space, competition is driving down fees. This benefits investors seeking affordable options to align their investments with sustainability goals.

The takeaway? European investors no longer have to sacrifice cost efficiency for sustainable investing. The ESG fund landscape has become more affordable and competitive, making it easier than ever to incorporate responsible investing principles into a well-diversified portfolio. While past performance isn't necessarily indicative of future results, some top-performing European ESG funds across various categories include:

• Schroder Sustainable European Equity Fund A Acc - This fund focuses on companies across Europe that demonstrate strong environmental, social, and governance practices. It has a 5-star Morningstar rating and has delivered a total return of 10.64% over the past year (as of June 24, 2024).

  Opens in a new window www.morningstar.co.uk

  Schroder Sustainable European Equity Fund A Acc

• Amundi Planet or Water UCITS ETF (DR) - This exchange-traded fund (ETF) invests in companies that contribute to solutions for environmental challenges related to water and sanitation. It has a 4-star Morningstar rating and has returned 8.21% over the past year.

• Nordea 1 – Global Sustainable Stars Equity Fund A - This fund invests in global companies with strong ESG credentials, focusing on those with high sustainability ratings. It has a 4-star Morningstar rating and has yielded 9.52% over the past year.

  Opens in a new window www.finanzen.net

  Nordea 1 – Global Sustainable Stars Equity Fund A