ESG is a term that refers to 3 different factors. The first factor is Environment that takes factors like climate change and carbon emissions into consideration. The second one is Social, that includes human rights and labor standards. The last factor stands for Governance, where board composition and lobbying activities are examples of areas. All of the three factors are taken into consideration when sustainable investors are making investment decisions (Peterdy, 2023)

The concept of sustainability is gaining momentum worldwide, especially in investment conversations. Investors are now showing more interest in sustainable investments thanever before, shining a spotlight on funds that focus on Environmental, Social, and Governance (ESG) factors. Since investments generally aim to generate returns, it's intriguing to explore how well these ESG funds actually stack up against conventional funds that don't prioritize sustainability factors as much. This research aims to enhance our understanding of the performance of these two fund types by delving into data and existing literature.

The ultimate conclusion drawn from this research is that spotting performance differences between conventional funds and ESG funds is a challenge. However, there's a noticeable difference in volatility that could potentially impact the overall returns.