Key takeaways
Datia’s team took a look at the market report “Costs and Performance of EU Retail Investment Products 2023”, published by the European Securities and Markets Authority (ESMA) on January 30th and based on data from 2021.
It’s a 36-page document and, in case you do not have the chance to read it, our team summarized specifically the 4 pages dedicated to ESG UCITS.
Summary of ESG funds performance:
- ESG UCITs, on average, outperformed non-ESG equivalents in net terms (22.8% vs. 16.8%)
- In a more granular analysis, the report finds that the ESG equity and mixed UCITS were the ones with better performance, but not the ESG bond UCITs
Summary of ESG funds costs:
- ESG UCITs, on average, charged cheaper fees in 2021 than the non-ESG equivalents (1.3% vs. 1.4%)
- Article 8 funds have lower total costs compared to Article 9 funds
- On the other hand, Article 9 equity and bond funds have a significantly lower Total Expense Ratio (TER) than Article 8 funds
Table with a summary of ESG UCITS costs and performance during 2021:
Table with a comparison of net performance and costs between ESG and non-ESG UCITS:
ESMA’s sample for this analysis includes:
- +5,000 funds disclosing sustainability metrics under Article 8 (around half of them are equity funds)
- around 500 funds disclosing sustainability metrics under Article 9 (approximately two-thirds are equity funds)
An interesting caveat about the sample: in 2021, existing funds continued to be converted from non-ESG into ESG funds. 536 funds were repurposed in the period, compared to around 250 in 2020.
According to the report, this trend is a response to the growing demand for ESG products.
Here are some other interesting findings of the report, but not related to sustainability:
- In 2021, the EU UCITS market remained highly concentrated: 90% of retail investment assets were managed by 15% of managers included in the sample
- The share of investment mainly focusing on equity was 10% in Italy while it was around 65% in the Netherlands and Sweden
- Funds from Sweden and the Netherlands are the ones charging the lowest fees
