In “Don’t Look Up”, the latest blockbuster from Netflix, two astronomers discover a planet-killing comet hurtling toward Earth. As vital as it is, Di Caprio’s and Lawrence’s warning is met with a very unimpressed and hedonistic audience who merely discards the umpteenth call for the end of the world. No spoiler, but it did not end well… Good news is you will not read about a threatening asteroid in this article, but climate change is no less worrying. Sustainable finance has set up a new era where extra financial aspects matter just as much as growth prospects, and this is another good news. However, much remains to be done to back up words with action if we want to avoid the “point of no return” - in both senses of the word.

COP26 came short of expectations, to say the least, but it is worth mentioning that a growing number of investors are venturing into ESG investing. In 2021, Morningstar reported that global sustainable funds attracted record inflows of $4 trillion  in 2021. This shows ESG is more than a fad and rather a new mindset that all money managers should embrace for the best interest of the planet, but also for their own interest. Based on year-to-date returns as of mid-December 2021, 56% of sustainable funds ranked in the top half of their respective Morningstar Categories, and only 44% ranked in the bottom half. The dichotomy between ESG and non-ESG is far more striking if we step back and compare historical performance of MSCI World vs MSCI ESG Leaders index. Indeed, the price performance of the virtuous stocks was higher than its “old economy” peers for seven out of the last ten years. However, the rally in ESG shares has also lifted their valuations overall, making them more expensive. The MSCI ESG Leader index's forward 12M P/E is on average 1.3 points higher at 20.5 vs 19.2.