Expert insight

Explaining ESG equity index fund performance

July 07, 2022

Jan-Carl Plagge

Vanguard Global Head of Active-Passive Portfolio Research

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Substantial deviations have declined over time
Return attribution by industry
The figure displays the difference in returns between the industry-adjusted benchmark portfolio and the U.S. equity market (the “industry allocation effect”) and the difference in returns between the ESG market portfolio and the ESG market-portfolio-specific industry-adjusted benchmark (the “selection/interaction effect”). Per year, these differences taken together ranged from almost -4% to more than +4% for the period shown.
The figure displays the breakdown of the “indus¬try allocation effect” into its single-industry-specific elements. Per year, these differences taken together ranged from roughly -4% to about +3% for the period shown.
Industries as a factor
Variability in individual funds
Understand the specifics of each fund
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