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At least 165 firms offer sustainable mutual funds and ETFs

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The Bottom Line:  Sustainable investors can choose from an increasing number of sustainable mutual funds/share classes and ETFs that are now offered by 165 firms.

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Ten largest management firms offering sustainable mutual funds and ETFsNotes of Explanation:  Where applicable, assets of affiliated firms are consolidated.  Assets as of December 31, 2022.  Source:  Morningstar Direct and Sustainable Research and Analysis LLC

Observations: 

  • Sustainable investors can choose from an increasing number of sustainable mutual funds/share classes and ETFs that are now offered by at least 165 firms with $300.4 billion in assets as of year-end 2022.  These firms offer a combined total of 1,348 sustainable investment mutual funds/share classes and ETFs.  These now include a growing selection of actively managed funds as well as index funds that pursue various forms of sustainable investing approaches ranging from values-based investing to thematic investing, impact investing and ESG integration.     
  • The segment is concentrated, with the ten largest firms accounting for $213.4 billion or 71% of assets under management.  
  • The largest firm offering sustainable investment funds is BlackRock that together with its mutual funds and ETFs manages $61.9 billion in assets across 139 funds/share classes.  Most of these are in the form of passively managed ETFs that make up 89% of the firm’s sustainable fund assets.   On the other hand, the second largest firm, Parnassus with its 10 funds/share classes (5 funds), only offers actively managed investment options.  At the other end of the range, just about 50% of firms manage less than $100 million in sustainable fund assets.  
  • Passively managed sustainable investing options, 197 in total, are available from 42 managers.  This segment makes up $116.4 billion or 39% of assets.  
  • Within the segment of the ten largest sustainable fund firms, expense ratios vary with average weighted expense ratios ranging from the lowest applicable to Dimensional Fund Advisors and Vanguard of 29 bps and 33 bps, respectively, to the highest levied by Amundi US at 1.07% to an average of 93 basis points charged by Calvert Research and management.  
  • In addition to confirming alignment with their sustainability preferences, investors interested in active management, recognizing that few active managers outperform securities market indices, should seek out funds with a sufficiently long management, financial and sustainable investing track record, usually three + years, reasonably sized funds and low expense ratios.  Expense ratios for actively managed funds can be twice as high as their passively managed counterparts, if not higher.  As for index funds, in addition to the factors noted above, follow-on considerations include the potential impacts of securities lending and currency exposures, to the extent applicable.
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Research

Research and analysis to keep sustainable investors up to-date on a broad range of topics that include trends and developments in sustainable investing and sustainable finance, regulatory updates, performance results and considerations, investing through index funds and actively managed portfolios, asset allocation updates, expenses, ESG ratings and data, company and product news, green, social and sustainable bonds, green bond funds as well as reporting and disclosure practices, to name just a few.

A continuously updated Funds Directory is also available to investors.  This is intended to become a comprehensive listing of sustainable mutual funds, ETFs and other investment products along with a description of their sustainable investing approaches as set out in fund prospectuses and related regulatory filings.

Getting started

Many questions have surfaced in recent years regarding sustainable and ESG investing.  Here, investors and financial intermediaries will find materials that describe the various approaches to sustainable investing and their implementation.  While sustainable investing approaches vary and they have thus far defied universally accepted definitions, many practitioners agree that they fall into the following broad categories:  Values-based investing, investing via exclusions, impact investing, thematic investments and ESG integration.  In conjunction with each of these approaches, investors may also adopt various issuer engagement procedures and proxy voting practices.  That said, sustainable investing approaches will continue to evolve.

In addition to periodic updates regarding sustainable investing and how this form of investing is evolving, investors and financial intermediaries interested in implementing a sustainable investing approach will also find source materials that cover basic investing themes as well as asset allocation tactics.

Inesting ideas

Thoughts and ideas targeting sustainable investing strategies executed through various registered and non-registered sustainable investment funds and products such as mutual funds, Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs), closed-end funds, Real Estate Investment Trusts (REITs) and Unit Investment Trusts (UITs). Coverage extends to investment management firms as well as fund groups. 

Independent source for sustainable investment management company research, analysis, opinions and sustainable fund disclosure assessments