Question

Why one would expect to see differences in performance between ESG mutual funds and conventional mutual funds?

Answer 1

ESG mutual fund are mutual funds in which the environmental, social and government factors are integrated.

Conventional mutual funds invest in stocks on the basis of the fund mangers expertise. The fund manager only looks into the financial aspect of the stocks, The ESG mutual funds invests in both the financial and non- financial perspectives. The  ESG criteria can also help investors avoid companies that might pose a greater financial risk due to their environmental or other practices. They invest only in companies that operate in a fair and efficient manner and who integrate the welfare of the employees in their business models.

The ESG mutual fund are not affected by the past financial performance as the conventional mutual funds,The ESG mutual funds have fewer alternatives to invest in as compared to conventional mutual funds.

Due to these factors, we expect to see a difference between ESG and conventional mutual funds.