Morningstar: The 'critical' factors investors must consider when investing in passive ESG funds

Range of strategies available

Tom Eckett
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Hortense Bioy of Morningstar
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Hortense Bioy of Morningstar

The growing range of passive options available with a sustainable tilt poses a due-diligence challenge for investors as the differences between various offerings are becoming more "nuanced", according to research conducted by Morningstar.

Its report, entitled Passive Sustainable Funds: The Global Landscape, noted there were four index characteristics and three fund factors which investors need to be mindful of when choosing a vehicle, as each sustainable product adopts different rules.  Index characteristics In terms of index characteristics, the report said it was crucial investors determined which environmental, social and governance (ESG) metrics were focused on. These can range from carbon emission intensity to green revenues to fossil fuel reserves, meaning the choice of one metric over another can lead to a dif...

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