ESG vs Traditional Fund Calculator — Fees and Returns Compared

Where the Two Funds Differ

An ESG fund and a conventional fund can hold overlapping assets and still end at different values, for two reasons that this calculator keeps separate. The first is the ongoing charge: screening holdings against environmental, social and governance criteria involves research and monitoring that a broad index tracker does not carry, and a narrower asset pool spreads fixed costs across less money. The second is the gross return, which depends on which holdings the screen admits and excludes over the period being measured. Published expense ratios vary widely by fund, provider and region, and the figure that applies is the one in a specific fund's own documentation rather than any general range.

How the Comparison Works

Each side compounds at its net rate, which is the gross return less the expense ratio. A 7% gross return against a 0.4% charge compounds at 6.6%. The starting amount and the monthly contributions both grow on the same monthly basis, so a single rate applies across the whole of each portfolio. The difference between the two final values is the headline figure, and the label names whichever side finishes higher.

Worked Example

The sample figures used on this page are 100,000 at the start with 500 a month for twenty years, a 7% gross return on the ESG side against 7.5% on the conventional side, and expense ratios of 0.4% and 0.3%. The ESG fund reaches 621,164.03 and the conventional fund 687,138.57, a gap of 65,974.54. Across the period 220,000 goes in altogether, the starting amount plus 240 monthly contributions, so the gap is just under 30% of everything paid in.

Which Difference Does More Work

The gap comes from two sources at once, and at these figures they are not close to equal. Splitting it gives 54,972.48 to the half-point difference in gross return and 11,002.06 to the tenth-of-a-point difference in charges. The Charge Share of Rate Effects row reports that split directly, and it reads 16.68% here.

Attribution of this kind depends on the order the two changes are applied, since each is worth slightly more when applied second. The row averages both orderings, which is the two-factor Shapley value and is the version that adds back to the gap exactly. The row is weighed against the sum of the two effects rather than against the net gap, so it stays between 0% and 100% even where the charges favour one fund and the returns favour the other: it reads 100% when only the charges differ and 0% when only the returns do.

The relative weight is not fixed. It follows the size of each difference, so a tenth of a point on charges only outweighs the return difference when the two gross returns are closer together than that.

What the Model Does Not Capture

Both returns are held constant for the whole period, which no fund's actual returns follow. Real returns vary year to year, and the order they arrive in changes the outcome for a portfolio receiving contributions throughout. Screening criteria also change over time, so a fund's holdings at the end of a twenty-year period need not resemble the ones it started with.

Tax is excluded, and it varies by jurisdiction and by the type of account the fund sits in. Dealing costs, bid-ask spreads and any platform charge sit outside the calculation as well, as do differences in how the two funds distribute income.

The strictness of a screen is not an input here and does not affect the arithmetic. Two funds carrying the same label can exclude very different holdings, so the figures this tool produces describe the two sets of numbers entered rather than any judgement about what either fund holds.