Good Business: The Best Funds With a Conscience

In climate news today…

• Australia’s capital city is facing its worst wildfire threat in 17 years.
• Asset manager State Street says ESG moves are no longer optional.
• Environmentalists aren’t happy with U.S. Democrats’  climate plan.
• The future of recycling is sanitation workers rejecting your bin.

(Bloomberg) -- Sustainability has turned into a powerful investment tool. Green companies are growing faster than the broader economy, and investors who bet on ESG funds are making a lot of money.

In Bloomberg’s fourth annual ranking of large U.S. ESG funds, investors including Brown Advisory, Morgan Stanley and Calvert Equity have translated sustainable investing into sizeable returns. To see the full list of the biggest ESG funds who are beating the market, click here.

The funds in the ranking benefited from big momentum bets on such tech firms as Alphabet, Microsoft and Amazon, as well as credit card companies Visa and Mastercard. Fund managers said their picks—companies that implement policies tied to environmental, social and corporate governance concerns—benefited from lower exposure to fossil fuels and had downside protection in last year’s market slumps. Another thing most of the top-performing ESG funds had in common: big bets on healthcare technology conglomerate Danaher Corp, which has been hitting all-time highs of late. 

“Sustainability and ESG is not just important to investors, but it’s important to companies,” said Joe Hudepohl, portfolio manager of Eaton Vance’s Calvert Equity. “Customers demand it and employees are demanding an increasing focus on it.” ESG fund managers praised Danaher for its water purification business and system for tracking recruitment and training of employees.

One thing seems certain: The number of companies adopting ESG policies is sure to increase, providing investors with more places to put their money. A key driver of this dynamic are employees: More than 350 Amazon workers laid into the internet giant for its climate practices, escalating their ongoing feud with management. Companies that have sought to stifle internal debate over climate change are increasingly finding that they are making matters worse, while those who respond by, say, placing a  worker representative on the board can defuse tensions. 

Sustainable Finance In Brief

• U.S. tech giants including Google led the way in buying clean energy last year. They need it to support a vast cyber landfill of data. 
• BorgWarner’s $1.5 billion offer for auto parts rival Delphi is about getting powertrains ready for the electric automobile era. 
• Goldman Sachs says it will only take companies public if their boards are diverse.
• Billionaire Marc Lasry’s Avenue Capital is raising $600 million for a private credit impact fund. 
• Norway’s sovereign wealth fund hasn’t divested itself of Lundin Petroleum yet; the Swedish oil company wants to keep it that way. 
• Carlyle Group is betting $100 million on a new solar initiative.

Here’s what else you need to know in Green

Can a VC Behind Smart-Homes Be a Sustainable Darling?: One fund found itself at the vanguard of ESG.

An AI Startup Plans to Fix Crumbling Cities: Cities across the world need to revive deteriorating pipelines.

Green Bonds Are Poised to Grow Up in 2020: Buying debt for environmental purposes hasn’t been a winning strategy. Maybe this year.

EU Wants More Climate Reports From Companies: The European Union will force companies to regularly report how they are adapting to climate change and how much they are doing to stop it.

Dirty Secrets of the Biggest Companies: From Bloomberg Opinion: Major companies should come clean on their polluting products.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net, Adam Blenford

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