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ESG investing has become mainstream, with billions now allocated across hundreds of funds available to UK investors.
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Our analysis of 209 ESG funds over 1, 3 and 5 years found that only 12.4% achieved a top 4 or 5 star rating, while 64.6% received a weaker 1 or 2 star rating.
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The 10 largest ESG funds represent a significant share of the market, ranging from equity trackers with heavy US technology exposure to global and emerging-market bond strategies.
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Several of the largest funds have delivered results above their sector averages, while others have fallen significantly behind.
ESG (Environmental, Social and Governance) investing has grown rapidly from a niche approach into a major theme within global markets. Today, billions of pounds are invested through funds with ESG credentials, giving investors the option to incorporate environmental and governance considerations into their portfolios.
However, popularity does not always translate into stronger returns. Some of the most purchased funds with ESG credentials in the UK have outperformed their sector averages, while others have fallen behind.
To evaluate how funds with ESG credentials have delivered, we reviewed the performance of 209 strategies available to UK investors. Each was measured over 1, 3 and 5 years and assigned a Yodelar rating on a 1 to 5-star scale, based on performance relative to sector peers. From this universe we highlight the 10 largest funds by assets under management, examining how they have compared within their respective sectors.
ESG Fund Performance Summary
As part of this review, we analysed 209 ESG and ethically themed funds available to UK investors. Performance was measured over 1, 3 and 5 years, with each fund assigned a Yodelar rating from 1 to 5 stars, based on its sector ranking across these timeframes.
The findings highlight a wide variation in results. Just 12.4% of funds achieved a top rating of 4 or 5 stars, indicating they consistently ranked in the upper half of their sector. In contrast, 64.6% were rated 1 or 2 stars, reflecting weaker performance relative to peers.
This analysis shows that while some ESG funds have combined sustainable objectives with strong performance, a large proportion have struggled to keep pace with sector averages.
The 10 Largest ESG Funds in 2025
As part of this review, we analysed 209 funds with ESG credentials that are available to UK investors. Performance was measured over 1, 3 and 5 years, with each fund assigned a Yodelar rating from 1 to 5 stars based on its ranking relative to sector peers across these periods.
The results highlight wide variation. Only 12.4% of funds achieved a top rating of 4 or 5 stars, consistently placing in the upper half of their sector. In contrast, 64.6% were rated 1 or 2 stars, reflecting weaker performance compared with peers.
This analysis shows that while a minority of funds with ESG credentials have combined sustainability factors with strong outcomes, the majority have underperformed their sector averages.
1. iShares MSCI USA ESG Enhanced CTB UCITS ETF
This ETF is the largest fund with ESG credentials available to UK investors, managing around £16.6 billion. It tracks the MSCI USA ESG Enhanced Focus CTB Index, which tilts towards companies with stronger ESG characteristics while maintaining broad exposure to the US equity market. The index excludes firms involved in activities such as tobacco, weapons, coal and unconventional oil and gas, and targets lower carbon intensity than the parent MSCI USA universe.
Over the past year, the fund returned 12.58% compared with a sector average of 11.88%. Over three years it delivered 39.89% against 34.48%, and over five years 80.49% versus 76.09%. These results place it consistently above the IA North America sector average, supported by exposure to leading US technology companies such as Microsoft, Apple, NVIDIA and Alphabet.
As a passively managed ETF, performance remains closely tied to broader US equity market trends. The ESG tilt reduces exposure to energy-intensive industries while increasing weighting towards technology and quality growth stocks, which has influenced results in recent years.
2. BlackRock ACS World ESG Screened and Optimised Equity Tracker
This fund is a global equity tracker within BlackRock’s ACS range. It seeks to replicate the MSCI World ESG Focus Low Carbon Screened Index, applying exclusions for companies with high carbon intensity and controversial business activities.
Managing around £6.5 billion, the fund invests in developed-market equities with about 70% allocated to the US, and the remainder spread across Japan, the UK and Canada. Over one year it returned 13.73% compared with a sector average of 10.29%. Over three years it delivered 37.05% versus 27.75% for the sector. Five-year performance data is not yet available due to its 2019 inception.
The portfolio’s bias towards US technology and financials has been a key driver of recent results. As a passive structure, performance will continue to reflect the fortunes of large developed-market equities, alongside the ESG screens applied by the index.
3. Vanguard ESG Developed World All Cap Equity Index Acc GBP
This fund tracks the FTSE Developed All Cap Choice Index and manages around £5.2 billion. It excludes companies linked to fossil fuels, tobacco, weapons, gambling and those with serious ESG controversies. The portfolio includes more than 4,000 holdings, providing very broad diversification across developed markets.
Over the past year it returned 13.51% versus a sector average of 10.29%. Over three years it delivered 40.68% compared with 27.75%, and over five years 70.94% against 56.57%. Performance has been supported by holdings in major technology companies including NVIDIA, Microsoft, Apple, Alphabet and Meta.
The fund’s broad coverage provides exposure to large, mid and small-cap companies, though results remain strongly influenced by the technology sector and the US market.
4. HSBC Developed World Lower Carbon ESG Tilt Equity Index
Launched in 2020, this fund tracks the FTSE Developed ESG Low Carbon Select Index. The index targets carbon emissions intensity and fossil fuel reserves 50% below the broader FTSE Developed Index, while also maintaining an average ESG rating at least 20% higher.
The fund manages around £4.75 billion. Over the past year it returned 14.93%, placing it in the top quartile of the IA Global sector. Over three years it delivered 34.70% versus 27.75% for the sector.
Top holdings include NVIDIA, Visa, Johnson & Johnson, Apple and Cisco. Results have reflected the strength of large US and developed-market equities, though the ESG tilt may limit participation in energy-led rallies.
5. iShares MSCI World ESG Enhanced CTB UCITS ETF
This ETF manages around £4.5 billion and seeks to track the MSCI World ESG Enhanced Focus CTB Index. It uses physical replication with an optimised approach as part of its index tracking process. The index applies ESG criteria while maintaining broad exposure to developed-market equities.
Over the past year, the fund returned 12.57% compared with 10.29% for its sector. Across three years it gained 37.70% versus 27.75%, and over five years it delivered 72.21% against 56.57%.
Returns have largely reflected the performance of developed-market equities, with a notable contribution from US technology stocks. The strategy reduces exposure to fossil fuels and carbon-intensive sectors. This has influenced outcomes, supporting performance when technology has been strong, but limiting relative results during periods when energy or commodities have led markets.
6. L&G Future World ESG Tilted and Optimised Developed Index
Launched in 2019, this fund tracks the Solactive L&G Enhanced ESG Developed Markets Index. It applies ESG tilts and exclusions, alongside Legal & General’s Climate Impact Pledge, which removes companies that fail to meet minimum climate standards.
Managing around £4.2 billion, the fund returned 13.95% over the past year against a sector average of 10.29%. Over three years it delivered 40.86% compared with 27.75%, and over five years 77.44% versus 56.57%.
The portfolio is heavily weighted to the US, with additional exposure to Japan, the UK and Canada. Technology accounts for almost 30% of holdings, led by Apple, Microsoft and NVIDIA. Returns have closely tracked the strength of the US technology sector in recent years.
7. PIMCO GIS Global Bond ESG Institutional Unhedged
This actively managed fund invests across global investment-grade bond markets, applying ESG criteria through exclusions and by assessing the practices of the organisations it lends to. Investment decisions are based on both broad market conditions and analysis of individual bonds. The fund may also use derivatives to adjust interest rate or credit exposure.
Over the past year it returned 3.06%, slightly below the sector average of 3.18%. Over three years it fell –0.99% compared with a sector gain of 3.78%. Performance has been influenced by changes in interest rates and bond yields, as well as currency movements given the unhedged GBP share class.
The fund’s ESG approach reduces the range of bonds it can hold. This means its portfolio may differ from broader bond benchmarks in terms of the sectors represented and the types of issuers included.
8. BlackRock Global Corporate ESG Insights Bond X
This fund provides exposure to investment-grade corporate bonds and tracks the Bloomberg Global Aggregate Corporate Index (GBP Hedged), with additional ESG-focused overlays. BlackRock’s proprietary scoring system tilts the portfolio towards issuers with stronger ESG characteristics.
Managing around £3 billion, the fund returned 4.35% over the past year, ahead of the sector average of 3.97%. Since launch in 2022, it has delivered competitive results within the IA Sterling Corporate Bond sector, supported by its low ongoing charges figure (0.03%).
Performance reflects both the underlying credit market and the fund’s ESG tilt, which favours higher-rated issuers on environmental and governance criteria.
9. BlackRock ACS World Multifactor ESG Screened & Optimised Equity Tracker X1
This fund tracks the MSCI World Select Multiple Factor ESG Low Carbon Target Index. The benchmark applies a multifactor approach, targeting value, momentum, size and quality characteristics alongside ESG screens and carbon reductions.
The fund manages approximately £2.9 billion. Over one year it returned 10.88% compared with a sector average of 10.29%. Over three years it gained 34.90% against 27.75%, and over five years 78.78% versus 56.57%.
Its multifactor structure diversifies exposures beyond pure market-cap weighting. Results have reflected both global equity market trends and the tilt towards companies scoring well on ESG and factor criteria.
10. PIMCO GIS Emerging Markets Bond ESG Inst Unhedged Inc GBP
Launched in 2019, this fund invests in emerging-market government and quasi-sovereign bonds, integrating ESG exclusions and engagement. It combines macroeconomic analysis with detailed country-level research.
The fund manages around £2.4 billion. Over the past year it returned 7.34%, ahead of the sector average of 5.73%, ranking 8th out of 55 funds. Over three years it gained 13.68% compared with 10.18% for the sector.
As an unhedged GBP share class, results are also influenced by currency movements. While emerging-market bonds can be volatile, the fund has compared favourably with peers in recent years.
Building an Efficient ESG Portfolio
Incorporating ESG funds into a portfolio is not just about selecting individual products — it is about how they fit together. An efficient portfolio requires a mix of assets that complement one another, helping to balance risk and smooth returns over time.
Our reviews of self-directed portfolios often reveal that investors focus heavily on a handful of well-known ESG funds without considering how much overlap exists between them. This can leave portfolios tilted towards certain regions or sectors, especially large US technology companies, while leaving other areas underrepresented.
To avoid these imbalances, portfolios need to be monitored and adjusted over time. Regular rebalancing ensures that allocations remain aligned with long-term objectives and that no single strategy dominates overall outcomes.
Summary
Funds with ESG credentials have moved from niche to mainstream, with hundreds now available to UK investors. To assess how these funds have performed, we analysed 209 strategies across equities and bonds, measuring results over 1, 3 and 5 years. Each was assigned a Yodelar performance rating based on how consistently it ranked against sector peers.
The findings highlight wide variation. Only 12.4% of funds achieved a top rating of 4 or 5 stars, while 64.6% were rated 1 or 2 stars, reflecting weaker results relative to peers. From this universe, we reviewed the 10 largest funds by assets under management, examining how they compared within their sectors.
The analysis shows that size, popularity, or ESG credentials alone are no guarantee of stronger results. What matters is how each fund contributes to the overall balance and risk profile of a portfolio. If you would like to understand whether your portfolio is structured effectively, you can arrange a free, no-obligation call with one of our advisers. During this review we will assess your holdings, highlight any inefficiencies, and provide clarity on how well your investments reflect your objectives.
