Environmental, social and governance standards have helped investors generate positive annualized returns, with environmental investments leading the pack globally, according to a new study from Amundi Asset Management.

The study reviewed the annualized financial returns of long-short portfolios designed with a broad ESG theme and a more specialized approach in North America, Europe, China, India, Indonesia, South Korea, Malaysia, the Philippines, Taiwan and Thailand. It found the environmental pillar was the leading investment class across all regions between July 2021 and September 2023.

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Performance in assets related to waste and biodiversity demonstrated the strongest performance with annualized returns of more than 10 per cent in North America, suggesting institutional investors have remained active in specific environmental components, despite an increase in public scrutiny of ESG measures in the U.S.

The study also noted increased interest in sustainable investment solutions has sparked an anti-ESG movement in the U.S., with large outflows recorded from a variety of open-ended funds. “The relevance of ESG criteria in assessing the risk of an investment, but also, in assessing the fiduciary duty, is in the spotlight,” it said.

As well, the increasing differentiation of the ESG pillars suggests that exposure to specific areas of the investment metric can be an effective strategy for institutional investors. Specialization through a granular approach supports the long-term financial sustainability of impact investment products, noted the study.

Read: 91% of Canadian institutional investors say climate change is top ESG concern: survey