Hint: there is a lot of Big Tech in them. But other factors matter too. Most important: it became fully mainstream.Source: Morgan StanleyThe events of 2020 accelerated many trends that had been slowly on the rise otherwise. The most obvious is the wider adoption of anything online — from health care to shopping. Less visible, but still remarkable in 2020, is the attraction of sustainable investment funds.This year, sustainability-focused and funds following environmental, social, and governance (ESG) metrics did quite well. An S&P index of climate-aligned companies beats the S&P 500 by 11%, with the gap widening over time. Overall, sustainable index funds are growing — fast.All this shows: there is no clear trade-off between a fund’s financial returns and its focus on sustainability.Should you just change your index funds to ESG or sustainable index funds then? Maybe. But not because high sustainability scores automatically deliver higher returns. It’s all about the methods to determine what “sustainable companies” are — scoring companies on environmental, social, and governance metrics.Source: S&P GlobalWhat makes index funds “sustainable?”There are no clear rules around what index funds qualifies as “sustainable investment.” Unlike the European Union, the U.S. leaves it pretty much open to index providers to say if an index fund is sustainable or not. And index providers rely on rating agencies, who use different systems to rate companies on ESG. The SEC is actively looking at funds’ ESG labels, but until now, there is no standard as to what makes a fund “ESG” or “sustainable.”Refinitiv and Morningstar have different methods, so a different top 10 of funds. Source: Financial Times (August 2020)In a year where tech stocks flourished, ESG funds benefited from heavy holdings in the largest tech companies. Many ESG index funds might as well be about big tech. The point here is…