It is time to move on from the 'will ESG outperform or underperform' debate

What is expected of industry has changed

As ESG funds continue to attract record flows, the debate as to whether these strategies should outperform has gained increased attention.

However, in our view, this debate is far too one dimensional from an investment perspective, and more importantly, it completely misses much of the point behind the rise in ESG investing. In 2020, ESG funds featured prominently in the headlines following very strong performance, and proponents pointed to this outperformance as the first big test for many of these strategies as evidence of their strong alpha potential. During the first months of this year, many of these strategies lagged behind considerably as market conditions changed and certain styles - most notably growth - suffere...