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After 2022’s Value fund bull-run, what does it mean for ESG?

Investors interested in ESG have traditionally favoured Growth funds, which invest in companies with high expected earnings growth such as technology and healthcare, and which tend to have lower carbon emissions. However in 2022, Value funds, which invest in undervalued companies, dominated market performance. This has left sustainable investors wondering if switching to Value-oriented holdings for better returns will sacrifice their ESG performance.

To shed light on this, Impact Cubed analysed the ESG impact of two iShares funds – the iShares Russell 1000 Growth ETF versus iShares Russell 1000 Value ETF, to see what the ESG implications really are.

The spider diagram above shows the Growth ETF (green) plotted against Value ETF (black dotted line).

Stark differences – ESG impact as tracking error

You should know by now that we don’t do ratings or scores at Impact Cubed. ESG impact is no different. We measure ESG impact using tracking error, so investors can easily see and compare impact across their investment collection.

Overall, when looking at both funds through our 15 factor corporate model (built from analysing thousands of business activities), the Growth ETF had a net impact of +19 bps vs the Value ETF. Additionally, the Growth ETF outperforms the Value ETF in almost all areas, including carbon and waste efficiency, water efficiency, and SDG alignment.

If you’d like to see a detailed breakdown of the comparison, covering all of our 15 corporate factors, enter your email below and we will send you the report for free, instantly.

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Carbon, carbon, carbon.

Carbon efficiency is a critical consideration for ESG investors, and it’s no surprise that the Growth ETF outperforms the Value ETF in this regard. This is largely due to the sectoral composition of Growth vs Value funds. The growth sectors, which are heavier in tech, healthcare, and communications, tend to have lower carbon/water/waste emissions than the energy, materials, and industrial sectors found in Value funds.

Companies in the Growth ETF are more carbon, water, and waste efficient, for $1M of revenue generated

The Growth ETF emits only 53.98 tonnes of GHG emissions per $1M revenue, while the Value ETF emits 226.17 tonnes, indicating that the Growth ETF is significantly more carbon-efficient than the Value ETF. This trend is also observed for Scope 3 carbon efficiency, with the Growth ETF generating only 489.25 tonnes of Scope 3 emissions per $1M revenue, compared to the Value ETF’s 1,138.28 tonnes.

Water efficiency

Water efficiency is another critical ESG factor which makes business sense. 2022’s CDP annual Global Water Report, finds that companies who properly integrate water into their business strategy uncover 4x more business opportunities than those who don’t.

The Growth ETF outperforms the Value ETF when it comes to water efficiency. When looking at our comparison, the Growth ETF uses 0.63 thousand cubic meters of fresh water per $1M revenue, whereas the Value ETF uses a much larger volume of fresh water per $1M revenue, at 14.63 thousand cubic meters. That’s about an x24 difference in water use!

Fair pay?

The only factor on which the Value ETF significantly outperformed Growth, is executive pay – with a lower Executive:Employee pay ratio of 103:1, roughly a third less than Growth. This probably isn’t surprising given the fact that CEOs and top management at Growth companies are often compensated higher than Value companies, for example in the healthcare sector.

Social good

We should point out that the only other area where the Value ETF outperformed the Growth ETF is revenue attributed to social good, with the Value ETF having 2% more revenues aligned to socially good activities vs the Growth ETF (17% vs 15% respectively).

SDG revenue alignment

SDG alignment is another significant factor, and the Growth ETF outperforms the Value ETF here as well in terms of total SDG alignment – with 8 SDGs being more aligned with the Growth ETF. We can however see the expected social elements of the Value ETF coming to life here – aligning more with SDGs 3 and 11 than the Growth ETF does.


In conclusion, the Impact Cubed analysis shows that, as expected, the Growth ETF had a more positive ESG impact than the Value ETF fund. In fact, the Growth ETF outperformed in almost all areas, including carbon efficiency, water efficiency, and SDG alignment. Even when we take into account more social and governmental factors, any expected outperformance by the Value ETF was not clearly seen.

Seeing outcome-based data like this enables investors to make more informed decisions about where to invest to get the most ESG impact.

This article does not constitute investment advice. To view our full disclaimers, click the button below.


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