How can positive returns and ESG impact be achieved in 2025?

Donald Trump's return to the White House has been a setback for ESG (environmental, social, and governance) investments. The Republican has never been a supporter of such policies, and during his first term, he took actions that made this clear, such as the U.S. withdrawal from the Paris Agreement, the key international treaty on climate change.

"We must recognize that 2024 has been a complicated year for this type of investment (ESG), and the outlook for 2025 does not seem to improve,” said David Iturralde, Manager of MAPFRE AM Fixed Income. This new U.S. legislature seems to be on a similar path.

“The Green New Deal has been a disgrace,” were Trump's textual statements in Davos last January, where he promised greater deregulation and also aimed to reverse policies in favor of sustainability and the fight against climate change.

“The election of Trump as president of the United States hampers the evolution of these strategies, as it brings a distinctly negative outlook, with expectations of a weakening in both regulatory and political support,” Iturralde added.

What about Europe?

In Europe, the commitment to ESG from the main institutions seems to remain clear, although we have to wait and see how the Old Continent adapts to this new situation without losing competitiveness on the international scene.

As Iturralde said, “Europe must decide whether to maintain its strict decarbonization plans, with the short-term costs it entails, or adapt them, also seeking to preserve the competitiveness of its industry, mainly automobile, at a politically complicated time for both Germany and France.”

Spanish funds committed to ESG

However, despite the setback caused by Trump's stance on ESG policies, there is still room for this type of investment. At least on the national scene. This has been demonstrated by the latest data from the Spanish Association of Collective Investment Institutions and Pension Funds (Inverco), which shows that the assets of Spanish investment funds aligned with sustainability grew to €146.964 billion throughout 2024, marking a 24.3% increase compared to 2023. Sustainable funds already account for 36.8% of the total equity of Spanish mutual funds.

Focusing on the number of funds that promote environmental and social characteristics (registered as Article 8), this amounts to 362, with a total of 731 registered classes. The number of funds allocated to sustainable investment (registered as Article 9) is 21, with 46 registered classes.

"Both the MAPFRE Group and its asset manager, MAPFRE AM, remain immersed in their transition to more sustainable objectives, so these types of strategies will continue to have a place in their portfolios,” said Iturralde.

Positive returns following ESG criteria

With everything mentioned above, it is clear that the major challenge for ESG investments is to continue obtaining positive returns. MAPFRE AM achieves this with its MAPFRE AM Inclusión Responsable and MAPFRE AM Good Governance mutual funds.

For the asset manager, in the long-term, “ESG strategies continue to make sense,” which is why they continue to focus on this type of investment.

MAPFRE AM Inclusión Responsable

This equity fund is part of Article 8 and is classified as a social impact. As indicated by MAPFRE AM, “it seeks to provide potential long-term growth by identifying companies that meet high ethical and financial standards.”

How does it do it? The fund uses an innovative methodology to analyze a group of European companies, choosing only those that have demonstrated solid financial stability over time. Furthermore, it incorporates a strong commitment to labor inclusion and support for people with disabilities, while also aiming to outperform the Euro Stoxx 50 Net Return, its benchmark index.

So far this year, it has been reaping a return of 7.69%. Looking at the longer term, it achieves an annualized return of 7.13% over two years, and 6.70% over five years.

MAPFRE AM Inclusión Responsable, which has been commercialized since 2019, already has assets in excess of €42 million. The fund has a risk of six out of seven, as stated in the product's DFI.

At January 31, 2025, the fund's sectoral exposure mainly focuses on three categories: industry (29.60%), technology (22.4%), and cyclical consumption (11.0%). ASML (8.11%), SAP SE (6.40%), LVMH (5.52%), and Schneider (4.30%) have the highest positions in the portfolio.

Top 10 positions

Data at 01/31/2025. Source: Finect

MAPFRE AM Good Governance

This global equity fund aims to invest in companies with strong corporate governance whose assets are momentarily underestimated by the market. Its management strategy is based on the premise that companies with good practices in corporate governance generate better long-term returns. Therefore, managers focus on identifying these companies and conducting a detailed fundamental analysis to detect those that are listed below their actual value and have a greater potential for long-term appreciation.

MAPFRE AM Good Governance, which was launched in 2017, has assets exceeding €120 million. The fund has a risk of six out of seven, as stated in the product's DFI.

Thus, on February 20, 2025, the fund achieved a positive return of 2.91% in 2025. Looking ahead two years, the annualized return rises to 7.89%, while over five years, it stands at 7.93%.

By geographic distribution and on January 31, 2025, the United States accounted for 45.6% of asset allocation. Meanwhile, the Eurozone represents 27%, and the United Kingdom holds 10.5%. In terms of sectors of activity, the most significant allocation is in technology (20.8%), followed by health (16.9%) and financial services (12.5%).

With regard to the largest portfolio positions, JPMorgan Chase & Co (4.37%), Procter & Gamble Co (3.74%), and Lululemon Athletica Inc (3.46%).

Top 10 positions

Data at 01/31/2025. Source: Finect