Socially responsible investments (SRI) within ETFs continue to raise positive returns in 2018 and have recovered better from earlier dips compared to many other mainstream markets.
Inflows and returns in the green for SRI
TrackInsight data shows that SRI stocks raised cumulative inflows of close to $930 million year to date, and $2.2 billion over the past 12 months. Returns are also in the green at plus 2.9% and 6.1% over the same periods respectively.
After a long rally, several market dips harmed investor confidence in the first few months of 2018, including the VIX spiking to 37 points within a couple of days in early February. The VIX slipped back to 12 points on 11 May, but has since ticked up again. It has not managed to return to its January levels of around 9 points.
Other markets struggling in comparison
Looking at other markets, SRI has fared surprisingly well, suggesting investors take less of a tactical view with this asset class.
Over the last five and 12 months, US stocks have returned 6.5% and 9.1%, beating SRI average returns, yet US inflows are not much larger than their environmentally-friendly counterparts. US stock ETFs have only gathered $1.1 billion since the New Year and $2.2 billion over 12 months.
Year to date, European stocks have only reached 3.1% returns, but the segment has seen outflows of $3.4 billion.
And in the UK, where Brexit negotiations and a possible second referendum looms, domestic stocks within ETFs have plunged by around $1 billion in outflows since January, although returns have recovered to a plus 3%.
SRI costs plummeting
One factor possibly boost confidence in SRI ETFs is their falling costs to compete more with the mainstream equity markets.
Research from ETF.com found that a blended portfolio of SRI and ESG – environmental, social and governance – ETFs only cost 0.21% per year, whereas excluding SRI and ESG, investors could fell their costs to 0.05%.
The chosen SRI portfolio provided exposure to more than 1,000 stocks from 46 countries and 174 bonds, and its annual fee came to less than half of the average equity ETF price of 0.54%.
