SUSTAIN Large Cap Equity Fund Index Declines 0.15% in August and Narrowly Trails S&P 500 Index

Summary

The SUSTAIN Large Cap Equity Fund Index, which tracks the total return performance of the ten largest actively managed large cap U.S. oriented equity mutual funds that employ a sustainable investing strategy beyond absolute reliance on exclusionary practices, declined 0.15% in August versus a narrow 0.31% total return gain recorded by the S&P 500 Index. Although the differential is less than 50 bps, at 0.46% or 46 bps, this marks the second month in a row during which the SUSTAIN Index trailed the S&P 500 Index.  On a year-to-date basis, the SUSTAIN Index is up 10.7% as compared to a gain of 11.93% registered by the S&P 500 Index or a differential of 1.23%. Refer to Chart 1.

Five of the Ten Component Funds Registered Declines for the Month; All Funds Post Positive Year-to-Date Results

Five of the ten component funds that comprise the index registered declines for the month, but year-to-date results are positive for all funds, with two funds, the Calvert Equity Portfolio Class A and Sentinel Sustainable Core Opportunities Fund Class A, persisting in their performance lead over the S&P 500 Index. The Calvert Equity Portfolio Class A, up 15.55%, continues to profit from significant investments in the two of the best performing sectors this year, including Information Technology (+25.27%) and Health Care (+17.74%).  These sectors also delivered some of the best results in August.  At the same time, the fund benefited from avoiding the energy sector, which is down almost 17% this year and about 5% in August.  Calvert was also the second best performing during August, registering a slight gain of 0.71%, and ranking below Pax Large Cap Fund Institutional Investor which was up 0.83%.  At the other end of the range and bucking its longer term outstanding track record, the Parnassus Fund is trailing the S&P 500 this year.  It is the lowest ranking of the ten funds in the index on a year-to-date basis and also the lowest ranking fund for the month of August, registering its first monthly decline of 2% in 2017.  As a fossil-fuel free fund, its avoidance of energy stocks has been a positive contributor to performance but this has been offset by overweight sector positions in financials, for example, that declined 1.25% in August as well as exposures to firms Allergan PLC and Charles Schwab Corp. which suffered declines.

SUSTAIN Index Explained

The index, which was initiated as of June 30, 2017 with data back to December 31, 2016, tracks the total return performance of the ten largest actively managed large cap domestic equity mutual funds that employ a sustainable investing strategy beyond absolute reliance on exclusionary practices for religious, ethical or social reasons. While methodologies vary, to qualify for inclusion in the index, funds must actively apply environmental, social and governance (ESG) criteria to their investment processes and decision making. In tandem with their ESG integration strategy, funds may also employ exclusionary strategies along with impact-oriented investment approaches as well as shareholder advocacy.

Multiple funds managed by the same management firm may be included in the index, however, a fund with multiple share classes is only included in the index once, based on the largest share class in terms of assets. The index is equally weighted, it is calculated monthly and rebalanced once a year as of December 31.

The combined assets associated with the ten funds stood at $21.2 billion and represent about 13.7% of the entire sustainable US equity sector that is comprised of 220 funds/share classes, including actively managed funds and index funds, with $154.4 billion in assets under management.