“The biggest sustainability challenge the world faces today is global warming,” writes Jon Hale, global head of sustainability research at Morningstar. Indeed, the Intergovernmental Panel report said a temperature increase of 1.5 degrees Celsius by 2040 could cost the global economy $54 trillion, and a major scientific report recently issued by 13 federal U.S. agencies said climate change could slash U.S. GDP up to one-tenth by 2100, which would be more than double the losses of the Great Recession.
“There is an increasing level of demand from all channels — advisors, individuals, corporations, foundations and endowments.” Even traditional advisors at Morgan Stanley and Wells Fargo who had considered sustainable investors “tree huggers before are starting to come around and ask for products,” says Jabusch.
At the same time, there’s a growing universe of sustainable companies to invest in, including new companies that belong to the “the next economy” and older ones transitioning to sustainable products or services — all “getting paid to solve risks rather than make them,” says Jabusch.
Morningstar’s Hale notes that the universe of sustainable mutual funds and ETFs continues to grow and by his count totals 341 funds available to U.S. investors that clearly note in their prospectus the use of sustainability or ESG criteria or seek to deliver a “measurable impact along with financial returns,” or both.
Through Dec. 17, 34% of 252 sustainable funds operating since the beginning of the year placed in the top quartile of their Morningstar category; 60% finished in the top half.