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Fund Solutions

ESG Funds Cheaper than Conventional Peers

European ESG funds are no longer more expensive than their non-ESG counterparts, and in the case of active strategies are often cheaper, according to new research by Morningstar Sustainalytics. That’s because scale and competition have pushed down costs, the research firm said. Analysis of ESG funds in six popular categories found average asset-weighted representative costs now stand at 0.83%, compared to 0.9% for conventional funds. Ten years ago, those figures were 1.55% for ESG funds, and 1.32% for non-ESG funds. Active ESG funds are on average cheaper than active conventional strategies, the research showed, while passive ESG funds are on a par with their non-ESG peers. Morningstar Sustainalytics also found that in most cases where ESG funds rebrand, prices do not go up. “Investors have been led to believe that ESG-focused funds are more expensive than conventional funds,” said Hortense Bioy, Head of Sustainable Investing Research at Morningstar Sustainalytics. “While there is undoubtedly a wide range of ESG strategies with various price tags out there, we found that, on average, ESG funds don’t charge more than non-ESG [ones].” This, Bioy explained, is mainly due to the proliferation of new products and growing competition in the ESG space in recent years.

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