Investors in Europe and Asia can transition to sustainable options with minimal impact on their portfolio exposures, according to a Morningstar research.
Key takeaways from the report include insights into the limited growth bias of both active and passive sustainable strategies relative to their conventional peers. While passive strategies maintain this limited growth bias across all categories, the growth bias for active strategies varies by category.
Regarding size factor, active sustainable strategies show a slight bias toward smaller market capitalisations compared to their conventional peers and the category benchmark. This difference is more pronounced in passive sustainable strategies, which exhibit greater variation in size exposure.
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Sector-wise, both active and passive sustainable funds are underweight in energy. Active sustainable strategies favour the technology sector, followed by healthcare. Meanwhile, passive sustainable strategies display a wider dispersion in sector allocations, with a skew towards technology stocks.
Geographically, active global sustainable strategies tend to overweight North American equities and underweight Asia and emerging markets. Conversely, the median regional allocations of conventional and sustainable global equity funds are quite similar on the passive side, with both overweighing North America relative to the category benchmark.
“Our study confirms that switching to a more sustainable investment profile can be achieved without significant alterations in risk exposures. This 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,” said Ronald van Genderen, senior manager research analyst at Morningstar.
