Can funds that address diversity and sustainability deliver long-term outperformance? The answer, one expert says, is an unequivocal yes.

The 20 best-performing mutual funds and ETFs with holdings that pose the lowest ESG risk generated an average 10-year gain of more than 18%, according to data from Morningstar Direct. That comes in well above broader index trackers like the SPDR S&P 500 ETF Trust (SPY) and the SPDR Dow Jones Industrial Average ETF Tracker (DIA), which posted 10-year gains of 13.23% and 12.47%, over the same period. On the fixed-income side, the iShares Core US Aggregate Bond ETF (AGG) posted a 10-year return of 3.78%, data show.

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