The median mutual fund expense ratio was lower for eight sustainable fund universes compared to broad market counterparts in 12 major active fund universes, which include the cheapest share class of observed mutual funds and ETFs. According to Morningstar research, world equity funds had the widest gap among equity funds, with the ESG group sporting a median fee 11 basis points lower. Sustainable global allocation funds' median fee had the widest gap at 14 basis points.
Some ESG funds challenge broad universe peers on fees
Passive funds had lower differentials between the two groups. Emerging market passive funds had the largest fee advantage over their broad market peers with a 28-basis-point fee differential. That sample size was relatively small (7), however, compared to the large-cap U.S. equity universe (50) and the large-cap foreign equity universe (20), and was also led by three ETFs with an average fee of 20.3 basis points.