SUSTAIN Large Cap Equity Fund Index Gains 1.7% in July but Slightly Trails S&P 500 Index

The SUSTAIN Large Cap Equity Fund Index gained 1.68% in July, trailing the S&P 500 by 0.38% or 38 bps. On a year-to-date basis, the index is up 10.83% versus the 11.59% registered by the S&P 500 Index.  Refer to Chart 1.

All ten of the SUSTAIN index mutual fund constituents delivered positive returns during the month of July, ranging from a low of 0.67% recorded by Parnassus Fund (PARNX) to a high of 2.30% achieved by Domini Impact Equity Fund Investor Shares (DSEFX).  Refer to Table 1.  The Domini fund and VALIC Company II Socially Responsible Fund were the only two funds in July to exceeded the performance of the S&P 500 Index.  Domini, which on a year-to-date basis has been hampered by security selection, wasn’t held back in July and benefited from its exposure to the information technology sector which was the best performing S&P sector and its zero exposure to energy which, unlike the sector’s year-to-date sharp decline, generated a positive return in July but lagged the index.

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.