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Sustainable Funds Monitor

A timely monthly snapshot of trends and developments in the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets trends, new fund launches and fund closures, sustainable bond issuances and the performance results of selected sustainable indices versus conventional benchmarks. Published monthly, the Sustainable Funds Monitor is usually available within ten days following the month’s end.

Sustainable Investing Monitor-October 1, 2024

The Bottom Line: Sustainable fund assets expanded due to capital appreciation, fund launches remain moribund, sustainable bond volume dips and ESG indices reflected mixed results. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), 1,412 funds/share classes in total (1,175 mutual funds/share classes and 237 ETFs), based on Morningstar classifications, closed the month of September with $361.3 billion in net assets. This represents a net gain in assets of $5.4 billion, or an increase of 1.5%. The monthly net gain was the lowest in the third quarter, trailing the $6.5 billion uptick in August and $6.6 billion in July. Still, net assets in September reached the highest month-end assets level achieved so far this year and above any month-end levels recorded in 2022. The net assets of both sustainable mutual funds as well as ETFs also reached new month-end high levels in September, attributable entirely to capital appreciation of about $5.4 billion. Based on a simple calculation that reflects the average September total return gains recorded by long-term mutual funds at 1.8% and 3.05% by ETFs, it is estimated that sustainable funds experienced cash outflows during September in the amount of about $2.3 billion. Mutual funds experienced cash outflows estimated at $1.7 billion while ETFs registered outflows estimated at around $600 million. Since the start of the year, focused sustainable mutual funds and ETFs have added a combined net of $29.6 billion in net assets, for an increase of almost 1%. Mutual funds accounted for about 70% of the gain. New Sustainable Fund Launches The drought affecting new listings of focused sustainable funds, which started after May of last year, continued into September 2024. There were no new mutual fund or ETF listings during the month, while during the third quarter, only one new ETF was launched versus five new funds during the same period last year and a total of only seven funds (adjusted), all ETFs, launched since the start of the year versus 64 during the same period last year. The only fund launched in the third quarter is the $300 million KraneShares Sustainable Ultra Short Duration Index ETF (KCSH) that, in addition to its fundamental investment strategy, invests in securities that are compatible with the principal objective of the Paris Climate Agreement, which seeks to limit temperature increases in this century to well below 2 degrees Celsius, preferably to 1.5 degrees Celsius, above pre-industrial levels (i.e., carbon reduction target levels) while also employing exclusionary screens based on certain business practices. During the month, there were two fund liquidations (excluding fund share classes). These included the $3.9 million Blue Horizon BNE ETF and the $16.3 million AMG GW&K Enhanced Core Bond ESG Fund with its three share classes. The scarcity in sustainable fund launches, starting after May of last year, may be attributable to the fact that anti-ESG movement in the US had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund offerings while at the same time continuing to support sustainable investing practices. Sustainability also remains important to corporate executives as well as asset owners. According to a just released Voice of the Asset Owner Survey 2024 report by published by Morningstar based on survey findings, 67% of asset owners globally say that “ESG has become more material in the last five years.” Green, Social and Sustainability Bonds Issuance (to Q3 2024) In the just released third quarter data according to SIFMA, global green, social and sustainable bond issuance in the third quarter of 2024 reached $210.4 billion. Based on slightly adjusted issuance numbers for the second quarter, this represents a quarter-over-quarter decline of $3.4 billion, or a 1.6% drop. Green bonds accounted for 57.9% of global issuance while sustainability bonds and social bonds represented 25.4% and 16.7%, respectively, of total issuance. Global issuance year-to-date reached $693.5 billion, running ahead of the comparable period last year when volume reached $617.4 billion or over the comparable period in 2023. This represents a $76.1 billion pick up in sustainable bond issuance, or an increase of 12.3%. Against a backdrop of another strong quarter when fixed income issuance in the US reached $2.9 trillion, or a quarter over quarter increase of 16.1%, US sustainable bond issuance in the third quarter came in at $38.3 billion, recording a modest $0.7 billion increase, or 1.9%. Year-to-date, US sustainable bond issuance reached $119.5 billion, for a year-over-year increase of $24.3 billion or 24.3%. It should be noted that SIFMA data tends to understate global sustainable bond issuance as it captures a narrower slice of the market that also includes sustainability linked bonds and notes, for example. More generally, sustainable bond data provided by different data sources can vary by significant margins. Last year, for example, UNCAD reported that global green bond issuance reached $872.2 billion while Bloomberg reported an even higher $939 billion versus $746.8 million compiled by SIFMA. More recently, according to BBVA, green, social, sustainable and SLB bond issuance through September 20, 2024, reached $698.7 billion. Of this sum, $431.0 million, or 62%, is sourced to green bonds, $108.7 billion was raised through social bonds, $133.4 billion is linked to sustainability bonds and $25.6 billion is attributable to sustainability-linked bonds. Short-Term Relative Performance: Selected ESG Indices vs. Conventional Indices After a volatile start to September that saw the S&P 500 give up 4.2% during the first four trading days of the month, large cap stocks staged a recovery to close the month at a record level. For the month, the S&P 500 set five new closing highs and 43 closing highs year-to-date. Fueled by a sense of optimism that inflation was under control, the Federal Reserve’s 50 basis point (bps) interest rate cut will boost U.S. growth and avoid a recession, further powered at the end of the month by the announcement of a major injection of economic stimulus in China and positive expectations for corporate earnings in the third and fourth quarters, the S&P 500, which saw a broadening of stocks participating in the rally, closed the month and quarter with gains of 2.14% and 5.89%, respectively. Year-to-date, the benchmark is up by 22.08%. Other major indicators were up too. The Dow Jones Industrial Average gained 1.85%, adding 12.31% for the year and 26.3% across the trailing twelve months. At the same time, the Nasdaq 100, propelled by the performance of the Magnificent 7 that as a group, reversed the previous month’s decline, posted a gain of 2.6% in September, 20% year-to-date and a whopping 37.5% since October 1, 2023. China’s economic stimulus announcement drove Chinese stocks higher, delivering the best returns in September, up 23.9% according to the MSCI China Index and up 29.3% year-to-date. This development also impacted other world indices, elevating the MSCI ACWI, ex USA, up 2.7% and the MSCI Emerging Markets Index up 6.7%. MSCI EAFE was more subdued, generating a gain of 0.9%. Bonds, as measured by the Bloomberg US Aggregate Bond Index, registered their fifth consecutive gain in September, adding 1.3% and further lifting their 12-month and year-to-date gains to 11.6% and 4.5%, respectively and putting them on track to beat last year’s 5.5% gain. High yield bonds did even better, adding 1.6% for the month and almost twice as well with an increase of 8% year-to-date. While ten year and two-year Treasury yields dropped by 10 bps and 2 bps, respectively during the month, yields shifted higher by 5 bps and 11 bps during the 8 trading days following in the Feds larger than expected 50 bps US Fed rate cut which took the Fed funds rate to a 4.75-5% range. For the first time this year, the inverted yield curve turned positive in early September ahead of the Fed’s rate action. Against this backdrop, sustainable securities market benchmarks, measured by a selected number of five MSCI ESG Leaders indices covering equities and one Bloomberg MSCI US Aggregate ESG Focus Index, reflected mixed results in September and year-to-date. Three indices, the MSCI USA ESG Leaders Index, the MSCI ACWI ex USA ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index outperformed their conventional benchmarks by 21 bps, 38 bps and 159 bps, respectively, with the international indices benefiting from a greater China weighting which was most pronounced for the narrower emerging markets index. At the same time, lower energy prices in September were likely a contributing performance factor. Mixed results were also achieved on a year-to-date basis while over the trailing twelve months, relative results improved as four of the six ESG indices outperformed by a range as high as 3.6% recorded by the MSCI Emerging Markets ESG Leaders Index. While mixed relative returns also show up in the three-year results, improved long-term relative outcomes are evident over the trailing five- and ten-year intervals, in particular due to the outperformance of international ESG Leaders indices. Sources: Morningstar Direct, Bloomberg, MSCI, SIFMA/Dealogic and Sustainable Research and Analysis LLC

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Sustainable Investing Monitor-September 1, 2024

The Bottom Line: Sustainable fund assets expanded with the benefit of capital appreciation, fund launches remained anemic while the relative performance of ESG indices rebounded. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), 1,433 funds/share classes in total, based on Morningstar classifications, closed the month of August with $355.9 billion in net assets. This represents a net increase in the amount of $6.5 billion, or a gain of 1.9%, versus a slightly higher $6.6 billion in the previous month. This is now the highest month-end assets level achieved so far this year and above any month-end levels achieved in 2022. The net assets of both sustainable mutual funds as well as ETFs also reached new month-end high levels in August, attributable largely to capital appreciation. Based on a simple calculation that reflects the average August total return gains recorded by long-term mutual funds at 1.9% and 1.5% by ETFs, it is estimated that sustainable funds experienced cash outflows during August in the amount of about $0.2 billion to $0.3 billion, largely attributable to capital appreciation and modest inflows into ETFs that were offset by slight mutual fund outflows. Since the start of the year, focused sustainable mutual funds and ETFs have added a combined net of $24.2 billion in net assets, for an increase of 7.3%. Mutual funds accounted for about 70% of the gain. New Sustainable Fund LaunchesThere were no new mutual fund or ETF launches in August, reflecting a continuing drought in sustainable fund launches. During the eight-month interval to the end of August, a total of six fund launches were recorded, all ETFs (this reflects an revised to reflect the launch of a new ETF in July). This record stands in sharp contrast to the 63 funds that were launched during the comparable period in 2023. Liquidations affected six mutual funds and two ETFs. Four BlackRock managed mutual fund liquidations were reported, with assets totaling about $104 million, largely attributable to institutional investors, perhaps in the form of seed commitments. At the same time, two ETFs were liquidated, including the $25.5 million BlackRock Future Climate and Sustainability Eco ETF and the $3.2 million Veridian Climate Action ETF. It seems that the fund “could not conduct its business and operations in an economically efficient manner over the long term due to the Fund’s inability to attract sufficient investment assets to maintain a competitive operating structure.” That said, the Chief Investment Officer and portfolio manager of the fund’s sub-adviser’s resigned without further explanation. The scarcity in sustainable fund launches, starting after May of last year, may be attributable to the fact that anti-ESG movement in the US had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund offerings. While this may be the case, a just released Bain & Company research report entitled The Visionary CEO’s Guide to Sustainability 2024 indicates that sustainability remains important to corporate executives even as the importance of sustainability has declined. At the same time, roughly 60% of 19,000 consumers surveyed say their concerns about climate change have increased in the past two years.Green, Social and Sustainability Bonds Issuance (to Q2 2024) The latest available data according to SIFMA show that global green, social and sustainable bond issuance in the second quarter of 2024 reached $207.1 billion. This represents a quarter-over-quarter decline of $62.4 billion, or a decline of 23.2%. Green bonds accounted for 68.3% of global issuance while sustainability bonds and social bonds represented 19.7% and 12.0% of total issuance. Global issuance year-to-date reached $476.6 billion versus $468.9 billion over the comparable period in 2023. This represents a slight $7.7 billion pick up in sustainable bond issuance, or an increase of 2%. US sustainable bond issuance in the second quarter registered $37.0 billion, down $6.5 billion from $43.5 billion issued in the first quarter 2024, or a 2% decline. That said, June saw a slight pickup in issuance, increasing from $11.9 billion to $13.2 billion. It should be noted that SIFMA data tends to understate global sustainable bond issuance as it captures a narrower slice of the market that also includes sustainability linked bonds and notes, for example. More generally, sustainable bond data provided by different data sources can vary by significant margins. Last year, for example, UNCAD reported that global green bond issuance reached $872.2 billion while Bloomberg reported an even higher $939 billion versus $746.8 million compiled by SIFMA. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesAfter a sharp stock sell-off at the beginning of August affecting the S&P 500 index as well as other major stock market indices, markets rebounded in response to positive economic data on inflation and retail sales that helped calm recession fears and a signal by the Federal Reserve that it was ready for interest rate cuts. For the full month, the S&P 500 registered a total return gain of 2.4% and 27.1% over the trailing 12-months, the NASDAQ 100 gained 1.2% and expanded the twelve month gain to 27.3% while the small cap Russell 2000 index, whose momentum may have faltered, dropped 1.5% and recorded a trailing twelve month gain of 18.5%. The best performing large cap sectors included Consumer Staples, Real Estate and Health Care, up 5.8%, 5.6% and 5.0%, respectively, while Real Estate and Health Care also ranked in the top three sectors of the mid-cap and small cap indices. Against this backdrop, focused sustainable mutual funds and ETFs, a combined total of 1,446 funds and share classes with $360.6 billion in assets under management, registered an average increase of 1.8% in August and an average 15.4% over the trailing twelve months. Sustainable international equity funds led with an average gain of 2.4% while US equity funds added an average of 1.9%.A selection of five US and international equity ESG Leaders indices and one fixed income benchmark, for a total of six benchmarks constructed by MSCI around ESG screening and exclusionary criteria, bounced back in August. Of the five equity-oriented ESG Leaders indices, the three foreign indices led their conventional counterparts over the 1-month, 3-month, YTD and trailing 12-month intervals. For the month of August, the MSCI Leaders ACWI ex USA ESG Index, EAFA ESG and Emerging Markets ESG led their conventional counterparts by levels ranging from a low as 43 bps to a high of 139 bps. However, their US large-to-medium cap as well as small cap counterparts achieved the opposite results in that they lagged over the four time periods up to 12-months. In August the MSCI USA ESG Leaders Index and USA Small Cap ESG Leaders Index fell behind their conventional counterparts by 4 bps and 35 bps, respectively. At the same time, the Bloomberg MSCI USA Aggregate ESG Focus Index came in even relative to the underlying Bloomberg US Aggregate Bond Index. Over the intermediate and long-term time frames, relative results through August have been faltering. Evaluated over three time periods, from three years to ten years, the best interval, over the five-year period, produces a 50% level of outperformance relative to conventional benchmarks. Over the three-year interval, only one benchmark, the MSCI USA ESG Leaders Index, managed to outperform its conventional counterpart. It did so by an annualized average 74 bps. Sources: Morningstar Direct, MSCI, SIFMA/Dealogic, various fund prospectuses and Sustainable Research and Analysis LLC

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Sustainable Investing Trends Monitor-August 1, 2024

The Bottom Line: Sustainable fund assets expanded modestly with outflows, sustainable bond issuance declined in Q2, selected ESG indices underperformed, and fund launches remained anemic. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), 1,451 funds/share classes in total, based on Morningstar classifications, closed the month of July at $349.4 billion. This represents a $6.6 billion net increase, or a net gain of 1.9% versus $342.8 billion the previous month. This also brings the combined total of focused sustainable long-term mutual funds and ETFs to within $100 million of the month-end high point for assets reached in March of this year. Based on a simple calculation that reflects the average July total return gains recorded by long-term mutual funds at 2.1% and 2.7% by ETFs, it is estimated that sustainable funds experienced cash outflows during July in the amount of $1.1 billion--offset by capital appreciation. Since the start of the year, focused sustainable mutual funds and ETFs have added a combined $17.7 billion in net assets, for an increase of 5.3%. Mutual funds accounted for about 3X of the gain. New Sustainable Fund LaunchesThere were no new mutual fund or ETF launches in July, reflecting a continuing drought in sustainable fund launches. During the seven-month interval to the end of July, a total of five fund launches were recorded, all ETFs. This record stands in sharp contrast to the 62 funds that were launched during the comparable period in 2023. During the month of July, there were two ETF closures, both managed by Rafferty Asset Management, including the $3.3 million Direxion Dollar Global Clean Energy Bull 2X Shares and the $21.3 million Direxion Hydrogen ETF. The management company noted that the decision to close the funds was based "on the view that each fund could not conduct its business and operations in an economically efficient manner over the long term due to each fund's inability to attract sufficient investment assets to maintain a competitive operating structure."The scarcity in sustainable fund launches, starting after May of last year, may be attributable to the fact that anti-ESG movement in the US had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund launches. At the same time, commitments to ESG integration do not appear to have subsided, based on reporting by the largest fund companies. Green, Social and Sustainability Bonds Issuance The latest available data according to SIFMA shows that global green, social and sustainable bond issuance in the second quarter of 2024 reached $207.1 billion. This represents a quarter-over-quarter decline of $62.4 billion, or a drop of 23.2%. Green bonds accounted for 68.3% of global issuance while sustainability bonds and social bonds represented 19.7% and 12.0%, respectively, of total issuance. Global issuance year-to-date reached $476.6 billion versus $468.9 billion over the comparable period in 2023. This is a slight $7.7 billion pick up in sustainable bond issuance, or an increase of 2%. US sustainable bond issuance in the second quarter registered $37.0 billion, down $6.5 billion from $43.5 billion issued in the first quarter of 2024, or a 2% decline. That said, June saw a slight pick-up in issuance, increasing from $11.9 billion to $13.2 billion. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesThe S&P 500 posted its best single day return of the month, up 1.58%, on July 31st, to end the month of July with a total return gain of 1.2% (this was before giving up 6.1% over the first three days of August when markets dropped across the globe, presumably instigated by weaker than expected US jobs report. Markets pretty much recovered by the end of the second full week of August). The Nasdaq 100 dropped 1.6% in July, value outperformed growth stocks and small as well as mid-cap stocks added 10.2% and 5.9%, respectively, in a rotation by investors from mega cap stocks to smaller companies and other sectors fueled by falling inflation and the anticipation of interest rate cuts that will stimulate wider economic growth that will benefit smaller companies. The Russell 2000 small-cap index has surged 7% since July 11 to the end of the month, while the S&P 500's gains have been led by financials, energy, and real estate sectors. Magnificent Seven tech stocks (i.e. Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla) had seen declines, exacerbated by a global sell-off in semiconductor companies. US bond prices got a lift as yields on 10-Year US Treasury securities ended the month at 4.1%, dropping by 27 basis points from 4.4% at the end of June in anticipation of lower rates. The Bloomberg US Aggregate Bond Index outperformed the S&P 500 in July, adding 2.3%. Year-to-date and 12-month gains were solidified, coming in at 1.6% and 5.1%, respectively.While emerging markets eked out a narrow 0.3% uptick in July, the MSCI ACWI ex USA and MSCI EAFE indices exceeded the results achieved by larger cap US indices, adding 2.3% and 2.9%, respectively. Reversing a three-month trend of outperformance, a selection of five US and international equity ESG Leaders indices and one fixed income benchmark, constructed by MSCI around ESG screening and exclusionary criteria, was dominated in July by ESG indices that trailed their conventional counterparts. Of the five equity-oriented ESG Leaders indices, three foreign indices fell behind their conventional counterparts in July while one index, consisting of large and mid-cap US-based stocks, underperformed. The sustainable investment-grade intermediate bond index came in even with its conventional counterpart while the MSCI USA Small Cap ESG Leaders Index was the only one to outperform its conventional counterpart. Total return performance deviations ranged from 12 basis points to 92 basis points Over the intermediate and long-term time frames, relative results are mixed. Sources: Morningstar Direct, Bloomberg, MSCI, SIFMA/Dealogic and Sustainable Research and Analysis LLC

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Sustainable Investing Monitor-July 1, 2024

The Bottom Line: Sustainable fund assets expanded modestly, sustainable bond issuance remains strong, ESG relative performance results were positive, but fund launches were still anemic. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), 1,454 funds/share classes in total, based on Morningstar classifications, closed the month of June at $342.8 billion in net assets. This represents a modest $3.7 billion net pick up in assets, or an increase of 1%, versus $339.1 billion the previous month and brings the combined total of focused sustainable mutual funds and ETFs to within a hair breadth away of the month-end high point for assets reached this year in March. Since then, net assets have been flat. Based on a simple calculation that reflects the average June total return gains recorded by long-term mutual funds at 0.8% and -1.23% by ETFs, it is estimated that sustainable funds experienced narrow cash inflows in the amount of $3.1 billion. Since the start of the year, focused sustainable mutual funds and ETFs have added a combined net of $11.1 billion in assets, 88% of which is attributable to mutual funds. New Sustainable Fund LaunchesEven as one ETF was launched in June 2024, versus zero fund launches last month, it's fair to say that the drought in sustainable fund launches continued through the end of June. During the six-month interval, only five new funds were introduced, all ETFs. This stands in sharp contrast to the 59 funds that were launched during the comparable period in 2023. At the same time, one ETN, one ETF and two mutual funds were shuttered. The new ETF is the Invesco MSCI Global Climate 500 ETF, making its debut with $1.6 billion in assets. The fund intends to track the performance of approximately 500 stocks included in the MSCI ACWI ex 6 Countries Index that meet certain environmental and climate criteria relative to their peers, including their own reductions in carbon and greenhouse gas emissions.The scarcity in sustainable fund launches, starting after May of last year, may be attributable to the fact that anti-ESG movement in the US had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund offerings. At the same time, commitments to ESG integration do not appear to have subsided, based on reporting by the largest fund companies. Green, Social and Sustainability Bonds Issuance While second quarter data is not yet available, green debt issuance globally is running at a fast pace and projections for green, social and sustainable bond (GSS) issuance indicate that global issuance could reach and perhaps exceed the USD 1 trillion-dollar mark. Moody's, for example, projects that green, social and sustainable bond issuance could reach US$ 950 billion in 2024, slightly higher than 2023's US$ 946 billion, while S&P's forecasts indicate that issuance could rise to above the US$ 1 trillion mark and perhaps equal or exceed the record level registered in 2021. According to Morgan Stanley issuance will be fueled by the perception that climate is the biggest single existential threat of our time and issuers are focusing more narrowly on their climate and transition objectives, particularly as the year 2030 gets closer. Another factor, according to Morgan Stanley, is the tremendous demand for power because of the AI boom. This phenomenon is putting increased demand on the need for additional power sources, renewable or otherwise, including alternative power sources, that will require significant investments to meet the emerging demand. Other drivers include the increasing role of sovereign issuers, both in emerging and developed markets. As of April 2024, 53 sovereign issuers have issued GSS-labeled bonds totaling $540 billion. Beyond the main players, countries such as Chile, Indonesia, Japan, Iceland and Australia have issued green bonds in 2024. In addition, voluntary frameworks, such as the International Capital Market Association (ICMA) introduced new criteria and further guidelines to support the green, social, sustainability, and sustainability-linked bond principles as well as the implementation of regulations, such as the EU Bond Standard, that attempts to establish clarity and comparability for sustainable bonds across Europe that's going into effect starting on December 21, 2024. On the positive side, such standards should bring about a higher level of confidence in such instruments to investors. While other reports covering sustainable debt volumes in the first quarter 2024 quote even higher volumes, the latest available data according to SIFMA show that global green, social and sustainable bond issuance in the first quarter of 2024 rose to $256.5 billion, for a Q/Q $127.9 billion increase or nearly doubling the issuance level recorded during the previous quarter. January was the strongest month, during which $123.2 billion in green, social and sustainability bonds were issued—led by green bonds over the quarter (but not in the US where sustainability bonds dominated). Issuance volumes moderated in February and March. U.S. issuance gained too, reaching $36.5 million for a Q/Q gain of 35% and exceeding the previous 2Q 2023 quarterly high mark since early 2022. This came on the heels of strong Q1 aggregate issuance levels for bonds in the US that saw an increase of $2.5 trillion for a 26% gain. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesFueled by enthusiasm for AI and expected interest-rate cuts before the end of the year in the light of softening economic data, the S&P 500 continued to register gains in June. After recording a 5% total return in May, the index posted seven new closing highs in June and ended the month up 3.6%. This was the benchmark's fifth monthly gain this year, for a year-to-date increase of 15.9% and a trailing twelve-month return of 24.6%. At the same time, the S&P 500 ESG index, designed to meet S&P's sustainability criteria while maintaining similar overall industry group weights as the S&P 500, was up 3.4% in June. While trailing in June, the ESG index is ahead of the S&P 500 with returns of 15.8% year-to-date and 25.1% over the trailing twelve-months. The performance of the conventional large cap index and ESG version have been driven by a small number of growth-oriented technology companies that now dominate the index. The same companies drove the performance of the S&P 500 Growth Index, up 6.98% in June, versus the S&P 500 Value Index that sustained a narrow -0.65% decline. This dynamic also propelled large cap conventional and sustainable growth funds to achieve top results in June. At the same time, small companies experienced another challenging month, with the Russell 2000 dropping 0.93%, after dropping around 1% in May and an even lower -1.69% posted by the Russell 2000 Value Index. On the bonds side, the Bloomberg Aggregate US Bond Index posted a slight 0.95% gain in June and a positive 2.6% increase over the trailing twelve months. During the month, the FOMC met and as expected, kept interest rates unchanged. The 10-year U.S. Treasury Bond closed at a yield of 4.36%, down from the prior month's 4.51%Overseas, strong performance in emerging markets pushed the MSCI Emerging Markets Index higher by 3.94% in June while the MSCI ACWI, ex USA Index and MSCI EAFE Index gave up 0.10% and -1.61%, respectively. Against this backdrop, based on a selection of five US and international equity ESG Leaders indices and one fixed income benchmark, all constructed by MSCI around ESG screening and exclusionary criteria, four of the six ESG indices recorded positive relative performance results in June while only two beat their conventional counterparts over the trailing twelve months. Total return margins of outperformance in June ranged from a low of 9 bps to a high of 1.02%. At the same time, the MSCI USA Small Cap ESG Leaders Index lagged in June while the Bloomberg MSCI US Aggregate ESG Focus Index came in even with its conventional counterpart. Over the intermediate and long-term time frames, based on three-, five- and ten-year time periods, the results remain mixed but improve over longer time periods. Over the trailing three-year time horizon, only two of the six benchmarks, or 33%, outperform but this ratio improves to four out of five, or 80%, over the trailing ten-year time interval. Sources: Morningstar Direct, Bloomberg, MSCI, SIFMA/Dealogic and Sustainable Research and Analysis LLC

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Sustainable Investing Monitor-June 1, 2024

The Bottom Line: Sustainable fund assets expanded due to market, social bond issuance was strong, ESG relative performance results were positive, but fund launches suffered. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), 1,475 funds/share classes in total, based on Morningstar classifications, closed the month of May at $339.1 billion in net assets. This represents an increase of $10.1 billion, or a net gain of 3%, which doesn't completely offset April's $13.9 billion decline but still closes the month with the second highest level of AUM so far this year. Based on a simple calculation that reflects the average May total return gains recorded by long-term mutual funds at 3.5% and 4.9% by ETFs, it is estimated that sustainable funds experienced net cash outflows in the amount of $2.9 billion. Long-term mutual funds, which are ahead by $6.4 billion since December 31st, sustained an estimated $3.3 billion in outflows. At the same time, the assets of the ETF segment registered a 2024 month end high level of $102.5 billion and recorded estimated inflows of $0.42 billion as of the month end. New Sustainable Fund LaunchesThe drought in sustainable fund launches continued through the end of May. During the latest month, there were no new listings of sustainable mutual funds or ETFs. At the same time, there was one fund closure in May (not factoring in share class closures), the small cap JP Morgan Small Cap Sustainable Leaders Fund with its eight share classes and combined total of $25.2 million in assets. So far this year, there have been a total of only four new fund introductions. These consisted entirely of ETFs. By way of comparison, 54 new funds were launched during the same period in 2023, including a combined total of 29 funds listed in May alone. In the following seven months, 14 funds were launched, and the number of monthly listings trended lower in succession. The scarcity in sustainable fund launches, starting after May of last year may be attributable to the fact that anti-ESG movement in the US had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund offerings. At the same time, commitments to ESG integration do not appear to have subsided, based on reporting by the largest fund companies. Green, Social and Sustainability Bonds Issuance While other reports covering sustainable debt volumes in the first quarter 2024 quote even higher volumes, the latest available data according to SIFMA show that global green, social and sustainable bond issuance in the first quarter of 2024 rose to $256.5 billion, for a Q/Q $127.9 billion increase or nearly doubling the issuance level recorded during the previous quarter. January was the strongest month, during which $123.2 billion in green, social and sustainability bonds were issued—led by green bonds over the quarter (but not in the US where sustainability bonds dominated). Issuance volumes moderated in February and March. U.S. issuance gained too, reaching $36.5 million for a Q/Q gain of 35% and exceeding the previous 2Q 2023 quarterly high mark since early 2022. This came on the heels of strong Q1 aggregate issuance levels for bonds in the US that saw an increase of $2.5 trillion for a 26% gain. One of the reasons for issuance level variations relative to SIFMA is attributable to the inclusion of sustainability-linked bonds, a segment of the sustainable debt instruments market that has been subject to regular criticism from analysts and asset managers who note that the bond targets are weak, are more likely to be missed and are hard to monitor. Results for April reported by Bloomberg, covering a broader universe of sustainable bonds, indicate that issuance of green, social, sustainable, sustainability-linked bonds as well as notes, reached $145.8 billion and $801.1 billion year-to-date. Also, according to Bloomberg, bonds financing social initiatives reached an all-time monthly high in April at $14.3 billion while green bonds (green bonds and bonds issued pursuant to the Green Bond Principles) reached $90 billion. According to published reports, the Treasury Borrowing Advisory Committee, an industry group that works closely with the Treasury, proposed in early May the consideration of various new securities such as callable bonds, different maturities of floating-rate and inflation-linked bonds, and the green-branded securities. The U.S. is the only major sovereign-debt issuer in developed markets that hasn't been selling green bonds, which have swelled into a $2.6 trillion market. The U.S. Treasury advisory group estimated that 17% of green bonds were issued by sovereign governments. In fact, the latest sovereign issuer, Qatar, raised $2.5 billion at the end of May through its first ever green bond. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesMay was a strong month for stocks as well as bond market indices, reversing April's declines. All three major stock benchmarks, the S&P 500 Index, Dow Jones Industrial Average and the Nasdaq Composite, reached new all-time highs and recorded, by month-end, gains of 5.0%, 2.6% and 7.0%, respectively. Ten of the eleven S&P 500 sectors ended the month on a positive note. The Tech sector gained 10%, Utilities added 9% while the Energy sector, due to falling oil prices, declined 0.4%. At the same time, all mid- and small-cap sectors recorded positive results. While well short of its high as the index continues to lag, the small cap Russell 2000 index managed to post a gain slightly above 5.0% that edged out its large cap counterpart by six basis points. Against this backdrop, a selection of five US and international equity ESG Leaders indices and one fixed income benchmark, constructed by MSCI around ESG screening and exclusionary criteria, recorded positive relative performance results in May as four of six ESG Leaders indices outperformed their conventional counterparts. These include the three indices tracking international markets and one index seeking to replicate the performance of large and medium cap US stocks. The three indices are the MSCI ACWI ex USA ESG Leaders Index, MSCI EAFE ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index, which pulled ahead of their conventional counterparts by 18 bps, 26 bps and 56 bps, respectively. Only the MSCI USA ESG Leaders Index that tracks large and mid-cap stocks missed the mark while the Bloomberg MSCI US Aggregate ESG Focus index was on par with its underlying benchmark. That said, the reverse is true regarding 12-month results when four of five ESG indices lagged their conventional counterparts. Over the intermediate and long-term time frames, based on three-, five- and ten-year time periods, the results are mixed but improve over longer time periods. Over three years, only one of six indices outperform, but this expands to three outperforming ESG indices over five years and four out of five outperforming ESG indices over the 10-year interval. Sources: Morningstar Direct, Bloomberg, MSCI, SIFMA/Dealogic and Sustainable Research and Analysis LLC

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Sustainable Investing Monitor-May 1, 2024

The Bottom Line: Sustainable funds gave up assets again in April while green bonds flourished. Relative performance results were mixed, and fund launches remained muted. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Sustainable long-term fund assets under management attributable to mutual funds and ETFs, 1,506 funds/share classes (focused funds) in total, based on Morningstar classifications, closed the month of April at $329 billion in net assets. This represents a month-over-month decrease of $13.9 billion, or a 4.1% decline and a year-to-date drop of $2.7 billion. Based on a simple calculation that reflects the average -3.2% total return recorded by long-term funds in April, it is estimated that sustainable funds experienced net cash outflows in the amount of $2.9 billion. Mutual funds, which are still ahead relative to December 31st by a narrow $1.5 billion, sustained an estimated $2.0 billion in outflows. At the same time, the assets of the ETF segment dropped below their year-end 2023 high level and recorded estimated outflows of $0.9 billion in April. New Sustainable Fund LaunchesThe cooling off in sustainable fund introductions continued into April when only one sustainable ETF was launched. The new fund, Carbon Collective Short Duration Green Bond Fund, managed by Tidal Investments LLC and sub-advised by Carbon Collective Investing, LLC as well as Artesian Capital Management (Delaware) LP, is the first green bond fund to have been introduced since the launch of the rebranded Franklin Liberty Federal Tax-Free Bond ETF, renamed the Franklin Municipal Green Bond ETF, as of May 3, 2022. During the year-to-date interval, there have been no new mutual fund listings. Averaging just 1 new fund introduction per month in 2024, this compares to an average of 11 monthly listings in 2023 up to May of the same year. Thereafter, the average for the next seven months dropped to two new fund listings per month. This development may be linked to the anti-ESG movement in the US that had gained momentum in the second quarter of 2023 and fund companies may have opted to lower their profile by curtailing focused fund offerings. At the same time, commitments to ESG integration does not appear to have subsided, based on reporting by the largest fund companies. Green, Social and Sustainability Bonds Issuance According to the latest data provided by SIFMA, global green, social and sustainable bond issuance in the first quarter of 2024 rose to $256.5 billion, for a Q/Q $127.9 billion increase or nearly doubling of the issuance level recorded during the previous quarter. January was the strongest month, during which $123.2 billion in green, social and sustainability bonds were issued—led by green bonds over the quarter (but not in the US where sustainability bonds dominated). Issuance volumes moderated in February and March. U.S. issuance gained too, reaching $36.5 million for a Q/Q gain of 35% and exceeding the previous 2Q 2023 quarterly high mark since early 2022. This came on the heels of strong Q1 aggregate issuance levels for bonds in the US that saw an increase of $2.5 trillion for a 26% gain. Other reports covering sustainable debt volumes in the first quarter 2024 quote even higher volume numbers. Moody's, for example, in a report issued on May 1 reported that issuance rose by 36% in the first quarter to $281 billion. Total issuance was up from $207 billion in the fourth quarter, and more or less in line with the same quarter a year ago. The report also noted that the green-bond segment led the way with $169 billion worth of new issue activity, followed by $55 billion of sustainability bonds, $48 billion in social bonds, and $10 billion of sustainability-linked bonds. One of the reasons for the variation relative to SIFMA data is attributable to the inclusion of sustainability-linked bonds, a segment of the sustainable debt instruments market that has been subject to regular criticism from analysts and asset managers who note that the bond targets are weak, they are more likely to be missed and are hard to monitor. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesInvestor optimism during the first quarter of the year shifted to lower gear in April as investors came to realize that interest rates are not likely to move lower any time soon and Middle East tensions escalated. At the same time, corporate earnings came in above the 1% estimated gain and provided some ballast to the equity market. All three major indices declined in April, with large cap growth stocks outperforming value stocks but the reverse was true for small cap stocks. The S&P 500 Index recorded a 4.08% decline while the Russell 2000 Index, consisting of small companies, dropped even lower, giving up 7.04%. After finally recording a monthly gain of 0.9% in March, bonds sold off as 10-year Treasury's posted the highest yield so far this year, ending the month at 4.69% versus 4.20% as of March 28, 2024. US investment-grade intermediate bonds, as measured by the Bloomberg US Aggregate Bond Index, dropped 2.53% and registered a wider decline of 3.28% year-to-date. Outside the U.S., the MSCI ACWI ex U.S. registered a decline of 1.8%, benefiting from the stronger performance in emerging markets that recorded an increase of 0.45%. Against this backdrop, April's performance of a selection of five US and international equity ESG Leaders indices and one fixed income benchmark, relative to their conventional counterpart indices as calculated by MSCI, reflected mixed results. Three benchmarks tracking international markets, the MSCI ACWI ex USA ESG Leaders Index, the MSCI EAFE ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index beat their conventional counterparts in April by a range between 26 basis points (bps) and 53 bps. At the same time, the performance of sustainable bonds was in line with conventional bonds while two U.S focused ESG indices, one tracking large and mid-cap companies and the other small cap companies, trailed their conventional counterparts. While relative results across the six indices improved on a year-to-date basis, this is not the case across the trailing twelve months during which interval only one of six benchmarks outperformed. Over the intermediate three-to-five-year time intervals, relative performance results were mixed while over the long-term, covering just five of the six ESG Leaders indices, four of the five indices outperformed. Sources: Morningstar Direct, Bloomberg, MSCI, SIFMA/Dealogic and Sustainable Research and Analysis LLC

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Sustainable Investing Monitor-April 1, 2024

The Bottom Line: Sustainable funds gave up assets in March while green bonds flourished. Relative performance results lagged, and fund launches continue to cool off. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Sustainable long-term fund assets under management attributable to mutual funds and ETFs, 1,527 funds/share classes in total, based on Morningstar classifications, closed the month of March at $342.9 billion in net assets. This represents a month-over-month increase of $5.7 billion, or 2.4%, or just about half the gain realized in February when assets increased by $11.3 billion. Based on a simple calculation predicated on the average 2.4% March total return performance results achieved by long-term fund, it is estimated that sustainable funds experienced net cash outflows of $2.4 billion. Since the start of the year, sustainable mutual funds and ETFs added a net of $11.3 billion, for a three-month gain of 3.4%. While the ETF segment has still not exceeded the month-end high level recorded at the end of July 2023, mutual funds have managed to eclipse the previous month-end high of $330.6 billion as of the same month. New Sustainable Fund LaunchesReflecting a cooling off in sustainable fund introductions, only three new sustainable funds were launched in March of this year. All are ETFs, including the actively managed Nuveen Sustainable Core ETF (NSCR) and the index tracking iShares Energy Storage & Materials ETF (IBAT) as well as Inspire 500 ETF (PTL). Alongside, there were no new mutual fund introductions in March. Through the end of the first quarter, a total of only four sustainable funds have been launched, all four ETFs. There were no new sustainable mutual fund listings so far this year. By way of comparisons, 18 sustainable ETFs were launched in Q1 2023 along with six sustainable mutual funds, for a total of 24 funds (excluding new share classes). The number of sustainable fund launches also trails when compared to the number of conventional funds that started operations in the first quarter of this year.Green, Social and Sustainability Bonds Issuance According to Bloomberg News, issuance of new green bonds, the largest category of sustainable debt by volume, reached $187.7 billion in the first quarter. Record sales in January and February boosted the quarterly figure, "driven by governments taking advantage of the sanguine credit markets to bring large deals." At the same time, sales of sustainability bonds used to fund both green and social projects totaled $64.3 billion in the same period. These data points are expected to be confirmed later in the month. As reported in February, according to data provided by SIFMA, global green, social and sustainable bond issuance in the fourth quarter of 2023 reached $128.9 billion, for a Q/Q $19.5 billion decline or 10.6%. 4Q US issuance, which declined for the second quarter in a row, dropped to $27 billion, down $1.3 billion or -4.4%. Global 2023 issuance reached $745.9 billion, for a Y/Y gain of $33.3 billion or 4.7%. Notwithstanding the deceleration in the US in the second half of 2023, total US issuance in 2023 rose to $122.0 billion, up from $93.8 billion in 2022 or a 30 Y/Y increase. It should be noted that SIFMA sustainable bonds issuance trends exclude certain types of sustainable bonds, such as sustainability-linked bonds and notes. According to data published by another source, for example Bank of America, total global sustainable bond issuance in 2023 reached $828 billion, for a Y/Y 7% gain. Of this sum, green bonds account for 59% of the total, or $489 billion, up 12% Y/Y. Some other data sources have arrived at even higher numbers for global issuances. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesInvestor optimism about the U.S. economy, earnings growth, enthusiasm about artificial intelligence (AI) opportunities, and, although these had begun to moderate, expectations for interest-rate cuts later this year, powered the broad stock market higher to end the month and the quarter at a new all-time high of the year. The S&P 500 added 3.2% in March and advanced 10.6% in the quarter to cap off its best three-month interval since 2019. The Nasdaq 100 was up 1.23%, 8.72% for the quarter and 39.65% over the trailing twelve-months, as the new Gang of Four stocks, including Nvidia, Microsoft, Meta Platforms (META) and Amazon.com recorded strong gains. Small cap stocks, as measured by the Russell 2000, exceeded the performance of large cap stocks with a gain of 3.58% but continue to trail large caps over the quarter and trailing twelve months at 5.18% and 19.7%, respectively. Outside the US, emerging markets outperformed developed and emerging markets, combined, adding 3.3% versus 3.1%. The Bloomberg US Aggregate Bond Index squeezed out a small gain, adding 0.92% in March and ending in the red for the quarter with a drop of 0.78%. Against this backdrop, sustainable mutual funds and ETFs combined, a total of 1,521 funds and share classes at the end of March, gained an average of 2.4% in March, 4.4% over the first quarter of the year and 13.0% over the trailing twelve months. US stock funds gained an average of 3.3%, taxable bond funds were up 0.91% and international equity funds recorded a gain of 2.7%. At the same time, the selection of five US and international equity ESG indices and one fixed income benchmark, calculated by MSCI, were dominated by benchmarks that either matched or underperformed their conventional counterparts. Two of six ESG indices outperformed their conventional counterparts. These include the MSCI USA ESG Leaders Index and the MSCI USA Small Cap ESG Leaders Index that outperformed their conventional counterparts in March by 49 and 29 basis points, respectively. Except for the small cap index over the trailing twelve months, the two indices also outperformed their conventional counterparts on a year-to-date basis and trailing twelve months. In contrast, the three selected non-US indices each lagged their conventional counterparts in March by a range between 3 and 44 basis points. The same indices underperformed their conventional counterparts over the trailing three- and twelve-month intervals. Concurrently, the Bloomberg Barclays MSCI US Aggregate ESG Focus Index matched the performance of its counterpart conventional benchmark. Over the intermediate-to-long term, intervals of three, five and ten years, relative performance results tend to be mixed. Sources: Morningstar Direct, Bloomberg, MSCI, Bank of America and Sustainable Research and Analysis.

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Sustainable Investing Monitor-March 1, 2024

The Bottom Line: Sustainable funds added net assets in February while green bonds flourished. Relative performance results lagged, and fund launches were missing in action. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Sustainable long-term fund assets under management attributable to mutual funds and ETFs, 1,537 funds/share classes in total, based on Morningstar classifications, closed the month of February at $337.2 billion in net assets, adding $11.3 billion, or a 3.5% increase, versus a decline of $5.8 billion the previous month. This represents a month-end peak level since December 2022. Based on a simple calculation, it is estimated that sustainable funds experienced net cash inflows in February, sourced to mutual funds and ETFs. Mutual funds and ETFs added an estimated $1.3 billion and $1.2 billion, respectively, but the dominant contributor to their gains was due to capital appreciation as equity markets continued their strong start of the year while intermediate-investment grade bonds posted declines. New Sustainable Fund LaunchesFebruary passed without a single new sustainable mutual fund or ETF launch. By way of comparison, six new funds were listed during February 2023, including two mutual funds and four ETFs, bringing the cumulative two-month 2023 launches to 22—now 21 funds behind. Mutual fund and ETF listings started to decelerate following the launch of 29 funds in May of 2023. During the month of February there were several fund closings. Nine ETFs closed, including two with over $30 million in net assets. Notable is the closing of Wisdom Tree's three ESG ETF offerings, with a combined total of $100 million in assets prior to closing. There were also two sustainable mutual fund closings, including one fund managed by Angel Oak that was acquired by an ETF managed by the same firm that also employs an identical ESG integration approach. Green, Social and Sustainability Bonds Issuance Final numbers through February are still to be determined, but according to data compiled by Bloomberg, sales of green, social, sustainability and sustainability-linked bonds reached around $90 billion in February. This, according to Bloomberg, is close to the record of roughly $91.3 billion issued in February 2023. The same source reported that sales of green bonds reached a record $54.7 billion, the most active level of issuance since the inception of the green bonds market in 2007. This follows a record January during which about $83.3 billion in green bonds were issued. As reported last month, according to data provided by SIFMA, global green, social and sustainable bond issuance in the fourth quarter of 2023 reached $128.9 billion, for a Q/Q $19.5 billion decline or 10.6%. 4Q US issuance, which declined for the second quarter in a row, dropped to $27 billion, down $1.3 billion or -4.4%. Global 2023 issuance reached $745.9 billion, for a Y/Y gain of $33.3 billion or 4.7%. Notwithstanding the deceleration in the US in the second half of 2023, total US issuance in 2023 rose to $122.0 billion, up from $93.8 billion in 2022 or a 30 Y/Y increase. It should be noted that SIFMA sustainable bonds issuance trends exclude certain types of sustainable bonds, such as sustainability-linked bonds and notes. According to data published by another source, for example Bank of America, total global sustainable bond issuance in 2023 reached $828 billion, for a Y/Y 7% gain. Of this sum, green bonds account for 59% of the total, or $489 billion, up 12% Y/Y. Some other data sources have arrived at even higher numbers for global issuances. Short-Term Relative Performance: Selected ESG Indices vs. Conventional IndicesEquity markets continued their strong start to the year in February, with the S&P 500 Index recording its fourth consecutive monthly gain. The index closed above 5000 for the first time and produced a total return of 5.3%, expanding January's gain of 1.7% to reach an increase of 7.1% since the start of the year. Non-US stocks, including large and mid-cap companies representing developed and emerging market countries, were up 2.53% according to the MSCI ACWI ex USA Index. At the same time, the US bond market retreated as concerns that the Federal Reserve may be less inclined to lower interest rates amid economic strength led to rate reduction expectations being adjusted from March to June. Bonds declined 1.41% in February and 1.68% year-to-date, per the Bloomberg US Aggregate Bond Index. Reversing January's results, during which a selection of six US and international equity ESG indices and one fixed income benchmark calculated by MSCI either matched or outperformed their conventional counterparts, only two of six ESG indices either matched or outperformed their conventional counterparts in February. These include the MSCI USA ESG Leaders Index and the Bloomberg MSCI US Aggregate ESG Focused Index that outperformed or matched their conventional counterparts by 22 bps and 0 bps, respectively. Emphasizing companies that are assigned high environmental, social and governance ratings by MSCI relative to their sector peers, the year-to-date results of these selected indices are now mixed—with three domestic tracking equity and fixed income ESG indices outperforming while the three international ESG indices are lagging. Similar outcomes are applicable to the intermediate-term time horizons of three and five years, but with shifting geographic patterns of outperformance/underperformance. Sources: Morningstar Direct, Bloomberg, MSCI, Bank of America and Sustainable Research and Analysis.

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Sustainable Investing Monitor-February 1, 2024

The Bottom Line: Fund's net assets declined in January, also recording positive relative performance, while new fund launches lagged and sustainable bonds gain in 2023. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Long-terms sustainable fund assets under management attributable to mutual funds and ETFs, 1,551 funds/share classes in total based on Morningstar classifications, closed the month of January with $325.9 billion in net assets, dropping $5.8 billion, or 1.8% of assts versus December 2023. This represented a setback relative to the monthly average gain in assets of $1.7 billion over the previous twelve months. Sustainable mutual fund assets recorded a net decline in January, ending the month at $228.6 billion, for a net reduction of $1.2 billion, or 0.5%. On the other hand, assets sustainable to ETFs dropped by $4.6 billion or a decline of 4.6%. Based on a simple calculation, it is estimated that sustainable funds experienced net cash inflows in January, sourced to mutual funds. Mutual funds likely saw estimated net outflows in the amount of $400,000 while ETFs experienced and estimated $1.6 billion in outflows. The divergence between net asset changes affecting mutual funds and ETFs is attributable to some significant variations in the composition of funds that make up each segment and the performance of some of these segments in January. For example, the sustainable ETF segment includes 16 funds/share classes, making up 7% of ETF assets classified in the Miscellaneous category that dropped 11.4% in January. The same category in the mutual funds segment is comprised of only 7 funds/share classes, makes up about 0% of mutual fund assets and recorded a decline of 7.9%. New Sustainable Fund Launches One new ETF was launched in January but there were no new mutual fund listings. By way of comparison, there were two ETF listings and 14 mutual fund launches in January of last year. Mutual fund and ETF listings started to decelerate following the launch of 29 funds in May of 2023. During January, there were also five sustainable fund closings, including one mutual fund and four ETFs. The five funds likely closed due to their inability to attract assets. Four of the five funds had less than $10 million in AUM while the fifth fund was likely unable to reach scale beyond its seed capital. Green, Social and Sustainability Bonds Issuance According to data provided by SIFMA, global green, social and sustainable bond issuance in the fourth quarter of 2023 reached $128.9 billion, for a Q/Q $19.5 billion decline or 10.6%. 4Q US issuance, which declined for the second quarter in a row, dropped to $27 billion, down $1.3 billion or -4.4%. Global 2023 issuance reached $745.9 billion, for a Y/Y gain of $33.3 billion or 4.7%. Notwithstanding the deceleration in the US in the second half of 2023, total US issuance in 2023 rose to $122.0 billion, up from $93.8 billion in 2022 or a 30 Y/Y increase. US green, social and sustainability bonds issuance accounted for 1.5% of total US fixed income issuance in 2023. It should be noted that SIFMA's sustainable bonds issuance trends exclude certain types of sustainable bonds, such as sustainability-linked bonds and notes. According to data published by another source, for example Bank of America, total global sustainable bond issuance in 2023 reached $828 billion, for a Y/Y 7% gain. Of this sum, green bonds account for 59% of the total, or $489 billion, up 12% Y/Y. Some other data sources have arrived at even higher numbers for global issuances. Short-Term Relative Performance: Selected ESG Indices vs. Conventional Indices Performance results posted in the first month of the year were mixed. While not as rigorous, the S&P 500 Index registered its third consecutive monthly gain in January, rising 1.7%, as stocks responded to stronger than expected economic reports without upward pressure on inflation. These data points were complemented by strength in corporate earnings and sales. Outside the US, emerging markets slumped 4.64% likely due to concerns regarding the economic outlook for China, pushing the MSCI ACWI, ex USA Index lower by almost 1%. At the same time, US investment-grade intermediate bonds gave up 0.27% for the month as expectations for the number and timing of interest rate cuts were tempered toward the end of the month based on the Federal Reserve Banks hawkish tone at its January meeting. Global government bonds were down 1.8%. Against this backdrop, a selection of six US and international equity ESG Leaders indices and one fixed income benchmark calculated by MSCI either matched or outperformed their conventional counterparts. This is in sharp contrast to December's relative performance when only one of six indices outperformed their conventional counterparts. That said, performance results are mixed over the intermediate-term, including the trailing three and five year time intervals. Notes of Explanation: Revised and updated 2-19-2024. Sources: Morningstar Direct, SIFMA, and Sustainable Research and Analysis.

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Sustainable Investing Monitor-January 1, 2024

The Bottom Line: Long-term fund assets gained due to market appreciation, new fund formations decelerated, sustainable bonds and the performance of selected ESG indices lagged. Long-Term Net Assets: Sustainable Mutual Funds and ETFs Sustainable long-term fund assets under management attributable to mutual funds and ETFs added $12.4 billion, or 4.2%, in net assets in December, ending the year with $331.7 billion. This was the highest month-end level achieved in 2023, reflecting a $36.8 billion net increase since the start of the year due entirely to strong market gains that were bolstered by the fourth quarter results achieved in both the stock and bond markets. ETF assets ended the year still slightly below the month-end high reached in July, but up $6.3 billion over the 12-month interval. Mutual funds, which make up 69% of sustainable fund assets, reached a month-end high of $229.8 billion at the end of December with the addition of $30.5 billion (net) over the course of the year. Note: Revised data to reflect latest updates, excluding sustainable money market funds. New Sustainable Fund Launches Two new investment funds were listed in December, consisting of two new ETFs and zero mutual funds, bringing the year-to-date total ETF launches to 32 and mutual fund launches (excluding share classes) to 36, for a combined 2023 total of 68 investment funds. There were three ETF closures in December and, excluding share classes, zero closings of mutual funds. Mutual fund and ETF listings decelerated in 2023 relative to 2022 with 28 fewer fund launches. Green, Social and Sustainability Bonds Issuance Based on preliminary data, green, social, sustainability and sustainability-linked bond issuance through the end of 2023 reached $828 billion, reflecting an increase relative to 2022 but still trailing 2021 in terms of volume. Sovereign bonds experienced gains, mainly from green bonds which also experienced an increase to $489 billion. Green bonds were 59% of labeled issuance in 2023. Issuance in the US fell from $52 billion in 2022 to $36 billion in 2023 and sustainability linked bonds dropped from $69 billion to $60 billion. Short-Term Relative Performance: Selected ESG Indices vs. Conventional Indices Markets continued to rally in December, fueled by the combination of a strong economy and reduced concerns of a looming recession, better-than-expected corporate earnings, lower inflation and an apparent end to the Federal Reserve's interest rate hikes that were expected to lead to multiple Fed rate cuts in 2024. Stocks, as measured by the S&P 500, posted a gain of 4.5% in December and a full year increase of 26.3%. At the same time, credit markets continued to rebound, gaining 3.8% in December and 5.53% for the full calendar year. Against this backdrop, mutual funds and ETFs gained an average of 5.1% in December and 13.5% over 2023. At the same time, only one of six selected ESG indices outperformed their conventional counterparts in December while four of six indices trailed behind while one ESG index matched the performance of its conventional counterpart. Over weightings/under weightings (>1%) in some sectors that may have contributed positively to performance were offset by the performance of individual stocks based on their respective weights. For the calendar year period, two of the six selected ESG indices outperformed their conventional counterparts. Sources: Morningstar Direct, Bloomberg, MSCI, Bank of America and Sustainable Research and Analysis.

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Sustainable Investing Monitor-December 2023

The Bottom Line: Fund assets added $22 billion in November from market appreciation, relative ESG performance was mixed and fund launches continued to trend lower. Net Assets: Sustainable Mutual Funds and ETFs Sustainable assets under management attributable to mutual funds and ETFs gained $22.0 billion in net assets in November, after sustaining drops for three consecutive months, largely benefiting from market appreciation that saw large cap stocks post a gain of 9.1%, per the S&P 500, while investment grade intermediate bonds registered a gain of 4.5%. This was the largest monthly gain in 2023 and brings assets under management within $11.1 billion of the month end high reached in July. Mutual funds added a net of $12.8 billion while ETFs gained $9.2 billion. Based on a simple calculation, outflows were limited to an estimated $1.0 billion in November. New Sustainable Fund LaunchesOne new ETF was launched in November, bringing the year-to-date fund launch total to 66, or 22 fewer fund launches as compared to 88 launches in 2022, or a 25% decline. Ten new funds were launches in November of last year, including nine ETFs and one mutual fund. No new mutual funds were launched in November, excluding new share classes. Fund launches began to fall off relative to 2022 starting in April of this year. Green, Social and Sustainability Bonds Issuance (Q3 2023)Green, social, and sustainability bond issuance data covering Q3 2023, compiled by SIFMA, reflects a decline in issuance globally and in the US. Issuance dropped to $163 billion in Q3, for a decline of $97 billion or 41% as compared to the second quarter. Cumulative 2013 issuance reached $603.8 billion, and based on average quarterly issuance of $201 billion, it looks like the hoped for $1.0 trillion issuance level is unlikely to be reached in 2023. Relative Performance: ESG Indices vs. Conventional IndicesPositive sentiment pushed stock prices higher in the US and overseas while bond prices gained as yields declined sharply. Sustainable mutual funds and ETFs posted an average gain of 7.55% in November, with equity funds adding an average of 9.3% and bond funds recorded an average gain of 4.1%. Against this backdrop, a selection of six ESG indices published by MSCI that emphasize high ESG scores (Leaders indices) experienced mixed results in November, as three ESG indices outperformed their conventional counterparts while three indices underperformed. Over the trailing twelve months only two ESG indices outperformed. Not shown on the chart, but over the past three years only one ESG index outperformed while three ESG indices did so over the trailing five years. Sources: Morningstar Direct, Bloomberg, MSCI and Sustainable Research and Analysis.

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Sustainable Investing Monitor-November 2023

The Bottom Line: Sustainable fund assets declined by $9.3 billion in October, relative ESG performance was positive, but fund launches and sustainable bond issuances lagged. Net Assets: Sustainable Mutual Funds and ETFs Sustainable assets under management attributable to mutual funds and ETFs dropped to $305 billion in October due to market depreciation, for a month-over-month reduction in assets of $9.3 billion, or 3%. This reflects the third consecutive monthly decline and compares to an even wider drop of $16.1 billion in September, or 6.9% of assets. On a year-to-date basis, sustainable fund assets are still up $11.3 billion. Mutual fund assets dropped by $7.1 billion in October, or 3.2%, while ETFs, which account for a slightly lower 29.4% of sustainable fund assets, gave up $3.5 billion or 3.8% of assets. A back of the envelope calculation indicates that the segment in October still experienced net inflows of around $323 million. New Sustainable Fund Launches Y-T-D, mutual fund and ETF launches are lagging, reaching 65 at the end of October versus 78 listed in 2022. For the third consecutive month in October, only one new sustainable investment fund was listed. The new Vontobel Global Environmental Change Fund, managed by Vontobel Asset Management, Inc., invests in companies whose products or services contribute to a sustainable objective in areas such as clean energy infrastructure, resource-efficient industry, clean water, building technology, low emission transportation and lifecycle management. Green, Social and Sustainability Bonds Issuance Green, social, and sustainability bond issuance data covering Q3 2023, compiled by SIFMA, reflects a decline in issuance globally and in the US. Issuance dropped to $163 billion in Q3, for a decline of $97 billion or 41% as compared to the second quarter. Cumulative 2013 issuance reached $603.8 billion, and based on average quarterly issuance of $201 billion, it looks like the hoped for $1.0 trillion issuance level is unlikely to be reached in 2023. Relative Performance: ESG Indices vs. Conventional Indices Sustainable mutual funds and ETFs recorded an average decline of 3.0% in October, reflecting investor concerns centered on Q3 corporate earnings and projected earnings, interest rates and the state of the economy. Stocks fell for the third consecutive month, with the large cap S&P 500 posting a drop of 2.1%. At the same time, bonds recorded their sixth consecutive monthly decline, giving up almost 1.6% based on the Bloomberg US Aggregate Bond Index total return results. 10-year treasury yields briefly touched 5% mid-month before settling at 4.88% on October 31st. Against this backdrop, four of six selected equity and bond MSCI ESG Leaders indices either outperformed or matched their conventional counterparts. October’s results displayed a clean split between the relative performance of foreign and domestic indices as the three selected foreign ESG benchmarks outperformed their conventional counterparts while the two domestic ESG indices lagged. At the same time, the Bloomberg MSCI US Aggregate ESG Focus Index matched its conventional counterpart. Over the trailing 12-months, five of the six MSCI ESG Leaders indices outperformed their conventional counterparts. Sources: Morningstar Direct, Bloomberg, MSCI and Sustainable Research and Analysis.

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Sustainable Investing Monitor-October 2023

The Bottom Line: Assets attributable to sustainable mutual funds and ETFs declined to $315.6 billion in September, during which time performance and fund launches lagged. Net Assets: Sustainable Mutual Funds and ETFs New Sustainable Fund Launches Sustainable assets under management attributable to mutual funds and ETFs declined to $331.7 billion, for a month-over-month drop of $16.1 billion, or 6.9% of assets. A back of the envelope calculation indicates that outflows accounted for $2.3 billion in September. On a year-to-date basis, sustainable fund assets are still up $21.9 billion. Mutual fund assets dropped by $10.5 billion in September, or 4.5% while ETFs, which account for 30% of sustainable fund assets, gave up $5.6 billion or 7% of assets. New Sustainable Fund Launches One new sustainable investment fund was listed in September, consisting of an emerging markets ETF launched by Matthews International Capital Management, LLC, versus seven funds in September 2022. Y-T-D, fund launches reached 64 versus 74 listed in 2022. The drop off impacted ETFs as well as mutual funds, with 4 fewer ETFs listed and 6 fewer mutual funds. Green, Social and Sustainability Bonds Issuance Green, social, and sustainability bond issuance data covering Q3 2023 have not been finalized yet. But on another front, Climate Bond Initiative (www.climatebonds.net) released a report in September indicating that a sample of 50 non-sovereign green bonds out of 106 bonds issued during the first half of 2023, 16 bonds or 32% achieved a greenium by pricing inside their own secondary market yield curves. Relative Performance: ESG Indices vs. Conventional Indices Sustainable mutual funds and ETFs recorded an average decline of 4.15% in September, as both stocks and bonds moved lower as concerns among investors regarding economic growth, inflation and higher for longer interest rates gained momentum. The S&P 500 gave up 4.9% in September and the Bloomberg US Aggregate Bond Index posted a 2.54% drop. Against this backdrop and for the second month in a row, four of six domestic and foreign ESG equity securities market indices underperformed their conventional counterparts. US intermediate investment grade bonds were even while the MSCI USA Small Cap ESG Leaders Index outperformed in September. Four of six ESG indices and three of six indices underperformed their conventional counterparts since the start of the year and over the trailing 12-month interval, respectively. Sources: Morningstar Direct, Bloomberg, MSCI and Sustainable Research and Analysis

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Sustainable Investing Monitor-September 2023

The Bottom Line: Sustainable funds' net assets benefited from positive flows, new fund launches held up relative to 2022 while ESG fund indices lagged again.[ihc-hide-content ihc_mb_type="show" ihc_mb_who="reg" ihc_mb_template="4" ] New Sustainable Fund Launches One new sustainable ETF was listed in August versus zero mutual fund launches, excluding additional share classes. The number of fund launches in August were below the monthly average recorded so far this year, but tracking ahead of new fund listings year-to-date by one fund at 63 launches relative to 62 launches in 2022. Net Assets: Sustainable Mutual Funds and ETFs Combined sustainable assets under management for mutual funds and ETFs declined by $6.3 billion in August, ending the month at $331.7 billion. That said, a back of the envelope calculation indicates that an estimated drop of $8.7 billion was attributed to the decline posted by capital markets and positive cash flows of $2.4 billion offset some of that decline. ETFs gave up $2.7 billion in net assets, or 2.7% while mutual funds gave up $3.6 billion in net assets, or 1.5%. Green, Social and Sustainability Bonds Issuance Green, social, and sustainability bond issuance reached $237 billion in Q2 2023, versus $224 in Q1, to close the first half of the year at $461 billion, per SIFMA. Global issuance could reach $1 trillion this year but through Q2 will still represent only about 4.0% of global long-term bond issuance. US issuance, at $34 billion, accounts for 14% of global issuance. While up relative to Q1, this level is below Q3 2021. Relative Performance: ESG Indices vs. Conventional Indices Sustainable mutual funds and ETFs posted an average decline of 2.58% in August, as both stocks and bonds edged lower. The S&P 500 gave up 1.59% in August and the Bloomberg US Aggregate Bond Index dropped 64 basis points, as investors started to contemplate the potential for higher interest rates over a longer time period in the light of economic strength fed by consumer and government spending. Energy was the only sector to post positive results in August and is up sharply over the trailing three months. Against this backdrop, four of six domestic and foreign conventional equity securities market indices outperformed ESG indices. US intermediate investment grade bonds were even while the MSCI USA ESG Leaders Index outperformed in August and the trailing 3-months, Y-T-D and 12-months. Sources: Morningstar Direct, Bloomberg, MSCI and Sustainable Research and Analysis

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Sustainable Investing Monitor-July 2023

The Bottom Line: New sustainable fund listings ticked up as well as green and social bonds and fund net assets while relative performance results lagged. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="reg,3,4,5" ihc_mb_template="4" ] The Bottom Line: New sustainable fund listings ticked up as did green and social bonds as well as net assets while relative performance results lagged. New Fund Launches The number of new sustainable fund launches, including mutual funds and ETFs in the first six months of 2023 reached 59, exceeding the 40 funds launched last year, or an increase of 48%. These included 35 new mutual funds and 24 ETFs. Net Assets: Mutual Funds and ETFs Sustainable fund assets added $10.3 billion, to end June with $320.6 billion, the highest level reached so far this year. A back of the envelope calculation based on the 3.99% average June gain realized by all sustainable funds combined, suggests that overall cash inflows for the month were positive. Green and Social Bonds Issuance Quarterly issuance in the first quarter of green, social, sustainability and sustainability-linked bonds bounced back, increasing 49% compared to the fourth quarter 2022 and 6% compared to the first quarter of 2022, led by supernational institutions and the public sector of advanced markets. Relative Performance: ESG vs. Conventional Indices Sustainable mutual funds and ETFs, across all asset classes and fund categories, gained an average of 3.99% in June. At the same time, ESG-equity oriented securities market indices tracked by MSCI lagged behind their conventional counterparts. One exception is the Bloomberg Barclays MSCI US Aggregate ESG Focused Index that performed in line with its conventional counterpart. [/ihc-hide-content] Sources: Morningstar Direct, Bloomberg and Sustainable Research and Analysis

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Sustainable Investing Monitor-August 2023

The Bottom Line: Relative performance results lagged again this month, as did fund formations and quarterly sustainable bond issuances, but sustainable mutual funds gained assets. New Fund Launches The number of new sustainable fund launches, including mutual funds and ETFs in the first seven months of 2023 reached 62, identical to the total number of launches in 2022. Three new ETFs were listed in July, versus 1 in July 2022. Net Assets: Mutual Funds and ETFs Sustainable mutual funds and ETFs added $17.4 billion in July, registering a second consecutive monthly gain, to end the month at a high point for the year at $338.0 billion in net assets. Based on the average overall total return gain of 2.22% in July (an average of 3.07% registered by ETFs and 2.07% posted by mutual funds) recorded by 1,593 sustainable mutual funds as well as ETFs, a crude estimate indicates that net cash flows for the month were positive at $9.9 billion. Mutual funds added around $10.2 billion while ETFs experienced a narrow $0.3 billion decline. Green and Social Bonds Issuance Green, social, sustainability and sustainability-linked bond issuance reached $283.3 billion in Q2 2023, versus $291 in Q1, to close the first half of the year at $574.3 billion. This represents a narrow decline of $7.7 billion, or 3%. Relative Performance: ESG vs. Conventional Indices Sustainable mutual funds and ETFs, across all asset classes and fund categories, gained an average of 2.22% in July while the S&P 500 gained 3.21% and the Bloomberg US Aggregate Bond Index gave up -.07%. As was the case last month, four of five ESG-equity oriented securities market indices tracked by MSCI lagged their conventional counterparts. The two exceptions, again this month, are the MSCI USA ESG Leaders Index and the Bloomberg Barclays MSCI US Aggregate ESG Focused Index that outperformed by 2 basis points or performed in line with its conventional counterpart index. Sources: Morningstar Direct, Bloomberg and Sustainable Research and Analysis

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Sustainable Funds Monitor: September 2020

The Bottom Line: After twelve consecutive monthly increases in AUM, sustainable funds and ETFs took a breather to end Q3 with $2,814.5 billion in assets.

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Sustainable Funds Monitor: August 2020

The Bottom Line: Sustainable mutual funds and ETFs ended August at $2,856.9 billion and are on a trajectory to exceed $3 trillion within several months.

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Sustainable Funds Monitor: July 2020

The Bottom Line: Sustainable mutual funds and ETFs regained momentum in July, adding $153.2 billion and recording an 11th monthly consecutive high of $2,752.4 billion.

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Sustainable Funds Monitor-June 2020

The Bottom Line: Sustainable mutual funds and ETFs took a breather in June, adding just $23.4 billion but reaching another new high of $2,599.2 billion.

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Sustainable Funds Monitor: May 2020

The Bottom Line: Sustainable mutual funds and ETFs continue their streak of nine consecutive monthly gains, reaching $2.6 trillion of assets under management in May.

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Sustainable Funds Monitor: April 2020

The Bottom Line: Sustainable mutual funds and ETFs reach another all-time high at the end of April with almost $2.5 trillion in assets under management.

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Sustainable Funds Monitor: March 2020

The Bottom Line: During one of the most volatile months in stock market history, sustainable funds assets in March 2020 pierced the $2 trillion level.

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Sustainable Funds Monitor: February 2020

The Bottom Line: Notwithstanding a severe market downturn at the end of February, sustainable MFs and ETFs added $4.8 billion to end at $1.871 trillion. The Sustainable Funds Monitor provides a timely monthly snapshot of trends and developments affecting the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets, fund flows, fund re-brandings, new fund firms, new fund launches and fund closures. FEBRUARY HIGHILIGHT: Notwithstanding a severe market downturn at the end of February that led to an S&P 500 decline of -8.23% and a Bloomberg Barclays US Aggregate Bond Index increase of 1.8% as investors shifted to bonds for safety, sustainable mutual funds and ETFs added $4.8 billion, the smallest 0.3% increase since the start of 2019, to close the month at yet another new high of $1.871 trillion.[ihc-hide-content ihc_mb_type="show" ihc_mb_who="reg" ihc_mb_template="4" ]

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Sustainable Funds Monitor: January 2020

The Sustainable Funds Monitor provides a timely monthly snapshot of trends and developments affecting the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets, fund flows, fund re-brandings, new fund firms, new fund launches and fund closures. JANUARY HIGHLIGHT: Assets reach new all-time high of $1.87 trillion due to re-brandings that offset fund outflows (-$59.2 billion) and negative market movement ($-5.01 billion).

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Sustainable Funds Monitor: December 2019

The Sustainable Funds Monitor provides a timely monthly snapshot of trends and developments affecting the sustainable investing market segment as seen through the lens of mutual funds and ETFs. The Monitor tracks total net assets, fund flows, fund re-brandings, new fund firms, new fund launches and Fund closures. DECEMBER HIGHLIGHT: Assets reach new all-time high of $1.6 trillion. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="reg" ihc_mb_template="4" ]

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