Implications of the Outperformance of Active Sustainable Investing

Although some U.S. states such as Florida and Texas have been passing or considering legislation preventing their pension systems from considering environmental, social, and corporate governance (“ESG”) factors, active sustainable investors have been financially outperforming over the long term, earning higher returns for their clients, while attracting tens of billions more dollars to manage on the back of this financial success.  Opportunities clearly exist to target both financial outperformance with a focus on sustainability and impact improvement.  The outperformance of active sustainable investing, at a time when most active investors underperform, is an encouraging sign that the future of active investment in general, and across asset class will need to consider sustainability issues more seriously.

By Cary Krosinsky & Sahil Mulji^[1]

I. INTRODUCTION

Although many U.S. states such as Florida^[2] and Texas^[3] have been recently passing legislation preventing their pension systems from considering environmental, social, and corporate governance (“ESG”) factors, active sustainable investors have been financially outperforming over the long term, earning higher returns for their clients while managing tens of billions more dollars on the back of such financial success.

Other states such as Indiana,^[4] Kentucky,^[5] and North Dakota^[6] considered similar legislation, but are understandably passing on adopting new “anti-ESG” rules out of