Incorporating ESG information may enhance risk-reward. The left hand chart shows global sustainable funds’ performance by Morningstar category quartile. By comparing how global sustainable funds’ returns rank relative to their Morningstar Category peers, we see that sustainable funds comfortably outperformed their peers in 2020 as well as their trailing 3- and 5-year. This suggests that the majority of sustainable funds across all categories are in the top half of their category for performance, while few are in the bottom half quartile, so ESG investing need not necessarily sacrifice returns. This left chart also highlights the importance of manager selection. Even though most of the sustainable funds have been outperforming their peers, all sustainable strategies are not created equal so active management remains key. The right-hand chart compares spreads of green and traditional corporate bonds over time. As the right-hand chart shows, green bonds have been increasingly trading at a premium versus traditional bonds since the start of 2019, suggesting a lower cost of capital for companies issuing green bonds.