Passive ESG under the PMX spotlight

With so much interest in ESG investing at the moment, Oliver Jones from our investment team recently produced a feature for Professional Adviser magazine which tackles the topic of passive versus active in the ‘green’ space.

No doubt as a result of soaring interest in the sector, there’s recently been a raft of new “ESG” investment funds launched that carry the ‘low cost’, passive label. Unfortunately, as Oli outlines in his feature, such funds come with limitations.


Passive ESG funds carry less cost because they rely entirely on quantitative data to decide on which companies to include and exclude. This is an issue because, in the ESG space, the quality of data available is largely unaudited and inconsistently reported.

It also means that smaller companies that are performing well within ESG criteria but aren’t able to produce the necessary data are left out, so most passive ESG funds are only focused on the larger companies.

The benefits of active

While passive ESG funds only rely on data, active ESG funds can go much further. Positive screening can be carried out across companies of all sizes, providing managers with in-depth knowledge about how individual companies are impacting people and the planet.

Potential investors shining an ESG light on companies can have a positive effect on how those companies run their businesses and those that don’t measure up can be sold from the portfolio. Passive funds however must hold all index constituents regardless of how they respond to engagement.

At PortfolioMetrix, we offer both active and passive sustainable solutions to meet the needs of a wide array of socially aware investors but, for investors who have a firm commitment to ensuring their money is helping to make a difference, our investment team is in no doubt that active management is the most effective option.


In terms of performance, PortfolioMetrix is one of the few discretionary managers that has an established track record of results, thanks to us launching a range of Sustainable portfolios almost four years ago.

What we’ve seen over that period is consistently good performance. Although no-one can predict what will happen in the future, the growing demand from investors for their money to be directed at companies with sustainable and accountable practices is good news on many fronts, not least helping shift the world to a more sustainable footing.

For a comprehensive look at all things ESG, check out our free-to-download white paper entitled ESG in Investing: everything you wanted to know but were afraid to ask.