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The ESG Illusion: The Hidden Truth About Top Asset Managers and Their Funds

Impact Cubed recently conducted a study on the impact of ESG-labelled equity ETFs marketed by six leading investment managers in the US (BlackRock iShares, IQ Candriam, Nuveen, SPDR State Street Global, Vanguard, XTrackers DWS). The results were eye-opening. (Manager’s fund names have been anonymised).

Net impact is measured in basis points, by comparing the fund’s exposure to its benchmark on 15 factual ESG metrics.


“This should serve as a warning for investors to do their due diligence when investing in ESG ETFs.”

Lack of impact reports

The first surprising finding was that only two out of the six managers provided any ESG impact reporting on their funds. This lack of transparency makes it difficult for investors to know what kind of impact they are making with their investments, if any at all.

Managers D and E are interesting examples, as their fund documents include impressive explanations of their expertise and process for creating ESG strategies. However, neither firm provides data on the actual ESG impact outcomes of that expertise!

“How can investors invest in an ESG focused ETF without knowing any details about its impact?”

Wild differences

Impact Cubed’s factual data shows that Manager D does quite well, with about the same expense ratio as Manager E but with 10x greater ESG impact. This raises the question of whether Manager E is truly living up to the ESG in its ETF name.

Similarly, Manager B has the highest fees, yet lands in the bottom quartile on impact. This should serve as a warning for investors to do their due diligence when investing in ESG funds. Just because a fund is labelled as ESG does not necessarily mean it is having a significant impact.

Bang for your buck

The study found that Manager C’s two funds delivered more than twice the ESG impact for significantly less fees than two other managers. In fact, its impact outperformed all others. Ironically however, their investors probably don’t know, because Manager C does not publish an impact report, which is a huge missed opportunity.

When it comes to the best bang for the buck, Managers C and D deliver the best ESG impact return per bps of fee. This means that investors can get a better impact to cost benefit with these managers than with other ESG-labelled equity ETFs.

“Just because a fund is labelled as ESG does not necessarily mean it is having a significant impact.” 

Good for you, your client and hopefully the planet.

Are you able to demonstrate the value you bring to your clients when it comes to ESG impact? If your portfolios have high ESG impact, then your clients should know they’ve put their money in the right place.

Do you have the factual insights needed to ensure that your clients’ portfolios are delivering the best ESG impact possible? By having factual data on portfolio performance, you can make more informed decisions about ESG investments and ensure that your clients’ investments align with their values.

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