The Morningstar Global Sustainability Leaders Index declined 26% in 2022, dragged down like a number of sustainability indexes by a bias toward growth-oriented sectors like Technology.
Taking a closer look at the sustainability style question, new research based on the Morningstar® Sustainability Style Indexes℠ suggests investors may benefit from taking a more nuanced, style-oriented approach to sustainable investing.
The Morningstar Sustainability Style Indexes, recently introduced by Morningstar Indexes, are designed to deliver broad, diversified exposure to the growth and value segments of the market while significantly reducing ESG risk. Recent performance for the indexes shows that removing a style bias from sustainable investments can significantly change the performance picture.
In 2022, the Morningstar Global Sustainability Large-Mid Cap Value Index declined 10.6% as compared to a 27.2% decline for its style counterpart the Morningstar Global Sustainability Large-Mid Growth Index. Notably, in January as global equity markets have found some footing, the growth index has risen 6.6% compared to a 5% rise for the value index.
Nick Johnson, Senior Product Manager, Morningstar Indexes:
“Recent market performance helps underscore that a more nuanced approach to sustainable investing can help investors better navigate the ESG landscape. Sustainable investments have been shown to perform differently across different regions, market caps and, notably, investment styles. Style and sustainability investing no longer have to be mutually exclusive; applying a style lens to sustainable markets can provide a clearer picture of the growth and value dynamics driving this very important and growing asset class.”
To see more from Morningstar on how investors can apply style considerations to sustainable investment strategies, go to the Morningstar Indexes website.
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