Transitioning from investing in conventional funds to sustainable ones has been found to have a minimal impact on institutional investors’ equity portfolio exposures, according to data provider Morningstar. In a new report, the group assessed the impact of switching from one type of investment to the other – using criteria such as sector, region, size and style – and found that both active and passive sustainable strategies tended to have a limited growth bias relative to their conventional peers. However, unlike passive strategies, active sustainable ones had a more varied bias across the four categories – for example, for the size factor, they showed a slight bias toward smaller market capitalisations when compared to conventional funds. Both active and passive sustainable strategies were significantly underweight in the energy sector, with bigger exposures to technology and healthcare. Investors in Europe and Asia were found to have more options for switching from conventional to sustainable funds without significantly changing their portfolio exposures, Morningstar observed. “Investors often express concerns about the implications of substituting conventional investments with sustainable options in their portfolios,” said Ronald van Genderen, Senior Manager Research Analyst at Morningstar. “Our study confirms that switching to a more sustainable investment profile can be achieved without significant alterations in risk exposures, [which] is because sustainable funds – whether active or passive – generally differ very little in size and style exposures to their conventional counterparts, thus providing a reassuring option for investors seeking to invest sustainably.”
