Sustainable Investing Monitor-November 1, 2025

Long-Term Net Assets: Focused Sustainable Mutual Funds and ETFs 

Focused sustainable long-term fund assets under management attributable to mutual funds and ETFs (excluding money market funds), based on Morningstar classifications, closed the month of October with $380.01billion in net assets across a combined total of 1,202 funds representing 423 mutual funds/999 fund share classes and 203 ETFs. This compares to last month’s 1,209 funds/share classes, for a net drop of seven funds/share classes, largely due to the liquidations of five focused sustainable ETFs during the month.  These include three thematic and two diversified equity funds, each with net assets below $15 million.  The reading of assets under management was higher for the sixth consecutive month and represents another new milestone relative to the $366.3 billion reached at the end of November 2024.

The October increase of almost $5.9 billion, or a gain of 1.6%, is attributable to a combination of capital appreciation as well as cash outflows given that sustainable long-term funds posted an average total return for the month of 1.8%. Much of the net gain in assets is attributable to ETFs which added $4.3 billion or 73% of the total increase in October.  At the same time, mutual fund net assets increased by almost $1.6 billion.        

Using a simple back of the envelope calculation, the gains achieved by sustainable long-term funds in October were entirely attributable to capital appreciation of about $6.7 billion.  Offsetting this amount were negative flows in the amount of about $0.8—a drop from last month’s $2.8 billion in estimated outflows. 

From the start of the year, combined assets under management increased by almost $26.7 billion, or 7.6%. The increase was largely attributable to net gains by ETFs that added some $21.6 billion, or 81% of the total, while the larger mutual funds segment added only about $5.2 billion.          

New Sustainable Fund Launches

Focused sustainable new fund listings (excluding share classes) remained dormant during October, for the second consecutive month. It is also the sixth non-consecutive month so far this year with zero new listings of focused sustainable mutual funds or ETFs. 

Year-to-date, only six new launches were documented (excluding any new mutual fund share classes), compared to eight new listings during the same period in 2024 and 65 in 2023. Of the six new listings this year, four were ETFs and two were mutual funds.  The drop-off in new listings continues to reflect the dramatic slowdown in new focused sustainable fund offerings, starting in mid-2023 to date.

As noted, new mutual fund share classes are not included in the count of new fund listings.   However, there was one mutual fund share class listing with a twist, backdated to September 2025, that may be of interest to fossil fuel free investors, namely The Sphere 500 Climate Fund Institutional Share Class (SPFEX).

Also in October, the universe of focused sustainable funds declined further.  Not only was there an absence of new fund offerings, but there were also five focused sustainable ETF liquidations during the month.  These include three thematic and two diversified equity funds, each with net assets below $15 million, reflecting the risk of closure when funds are unable to achieve break even at around $30 million in assets under management.  The funds are:  Calvert US Select Equity ETF, Direxion Daily Electric & Autonomous Vehicles Bull 2X ETF, Janus Henderson US Sustainable Equity ETF, JPMorgan Carbon Transition US Equity ETF and JPMorgan Climate Change Solutions ETF.

Climate Change Adaptation Categories in Sustainable Bond Issuance  

Data covering sustainable debt offerings in October has not been finalized yet. 

In the meantime, a recent ISS STOXX report highlights the emergence of adaptation bonds and the growing integration of climate-resilience criteria within sustainable finance taxonomies—evidence that markets increasingly recognize business and infrastructure vulnerability to climate change. While the energy transition is under way, most scientific assessments project that global temperatures will rise between 2°C and 3°C above pre-industrial levels by 2100, far overshooting the Paris Agreement’s 1.5°C goal. Falling short of global targets means that improving climate resilience is no longer optional but essential. Adaptation finance—capital directed toward strengthening resilience in infrastructure, communities, and ecosystems—is therefore gaining attention and momentum. Intensifying climate-related disasters, which now impose escalating economic losses in both developed and developing economies, have sharpened the financial case for investing in resilience. This is further evidenced by the adoption at the just concluded COP30 deliberations of a call to triple adaptation finance for vulnerable countries by 2035. In the U.S., billion-dollar disasters have become commonplace, while developing economies continue to suffer outsized damage from floods, droughts, heatwaves, and coastal storms. An estimated $7.4 trillion to $8.5 trillion is required annually by 2030 to meet the Paris Climate Agreement’s carbon emissions reduction targets.  But an estimated 90% of total climate finance worldwide is allocated to climate mitigation initiatives. Adaptation finance is critically underfunded, running below $65 billion a year or only 1/6th of expected needs by 2030. That said, new research from the World Resources Institute finds that every dollar invested in adaptation can yield more than ten dollars in long-term benefits, from avoided losses to broader economic and social gains.  According to ISS Corporate, sustainable debt instruments that include climate-adaptation categories have steadily grown since 2017, peaking at 35 issuances in 2023. Although issuance declined to 13 in 2024, the underlying trend signals that climate adaptation is an increasingly recognized segment of sustainable finance.    

Short-Term Relative Performance: Selected Sustainable Indices vs. Conventional Indices

Market overview.  While the latter half of the month was punctuated by significant volatility due to rising U.S.-China trade tensions and a prolonged government shutdown that hampered the release of key economic data, global risk assets nevertheless advanced in October 2025, with equities again outpacing bonds in both the U.S. and overseas markets. The S&P 500, which recorded a 1% gain during the first six trading days of October only to give it up and then climb beyond that level, gained 2.3% for the month.  This was the benchmark’s sixth straight monthly increase and near record highs, supported by strong Q3 earnings and enthusiasm around AI-linked mega-cap technology stocks. The NASDAQ Composite added 4.7% and advanced its year-to-date gains to 23.5%. Smaller U.S. companies also participated, with the Russell 2000 up 1.8% and 12.4% since the start of the year. At the same time, the results diverged from another small cap index, the S&P SmallCap 600 Index, due to methodological differences. The S&P 600 registered a decline of 0.9% and a much narrower year-to-date gain of 3.3%.  Except for small caps, growth outperformed value stocks.   

Overseas, the MSCI ACWI ex USA recorded a gain of 2.02%, benefiting from gains recorded in emerging markets that continued to shine.  The MSCI Emerging Markets Index added 4.2%, elevating year-to-date gains to 33.6%.  Emerging markets were led higher by gains recorded in the Far East and Eastern Europe, with South Korea posting an outsized 22.7% gain for the month and 93.3% increase year-to-date on semiconductor and AI optimism, gaining 22.7% while weaker Chinese data pushed prices lower by 3.8%.   

Fixed income performance was more muted. The Bloomberg US Aggregate Bond Index posted a gain of 0.62%, marking the third consecutive monthly increase-as a narrow decline in 10-year Treasury yields supported prices but slightly wider credit spreads capped gains. That said, the index is up a strong 6.16% year-to-date and is on track to deliver the best results since 2020.  In so doing, it continues to chip away at the significant decline (-13.01%) sustained in 2022 for those investors who remained invested.  Globally, core bond markets were close to flat.  The Bloomberg Global Aggregate Bond Index slipped 0.25% for the month, as lower government yields were offset by weaker credit and securitized sectors.

Overall, October 2025 extended a risk-on pattern: equities, particularly U.S. large-cap growth and AI beneficiaries, continued to lead, while bonds delivered only modest, rate-driven gains, leaving multi-asset investors rewarded for equity exposure but with limited diversification from global fixed income. The market remains sensitive to economic data and corporate earnings, with investors watching for clarity on the Federal Reserve’s next moves and the potential for an economic slowdown despite positive third-quarter earnings reports. 

Against this backdrop, focused sustainable long-term funds recorded an average monthly gain of 1.78% and a year-to-date increase of 14.38%.  Sustainable U.S. equity funds gained an average 1.77%, international equities exceeded that level by 16 basis points, landing at a positive 1.93% and fixed income funds gained an average of 0.51%.  The best performing sectors included health care, renewable energy and technology while the laggards included China region (one fund), real estate, and small cap stock funds.

Near-term results posted by selected sustainable indices.  In this environment, only two of the six MSCI sustainable indices, chosen to represent a broad cross section of sustainable investing market segments, outperformed their conventional counterparts in October. These included the MSCI USA Selection Index and the MSCI EAFE Selection Index that outperformed their conventional counterparts by 97 basis points (bps) and 23 bps, respectively.  Three-month and year-to-date results were mixed but over the trailing twelve months, only the MSCI Emerging Markets Selection Index managed to outperform its conventional counterpart by posting a gain of 35.10% versus 29.91%, or a 3.85% positive differential. A wider 12-month differential to the downside was experienced by the MSCI USA Small Cap Selection Index that trailed by 6.07%.  Despite similar sector weights, energy likely contributed meaningfully to the MSCI USA Small Cap Selection Index’s underperformance, with the divergence driven primarily by stock selection rather than allocation.  

Intermediate-to-long-term results posted by sustainable indices.  The MSCI USA Selection Index is the only one of the six benchmarks that shows consistent outperformance over the three-, five- and ten-year intervals to the end of October.  Right behind it is the MSCI Emerging Markets Selection Index that has outperformed over the preceding three and ten years and with wider margins. With regard to fixed income, the Bloomberg MSCI US Aggregate ESG Focus Index has managed to very closely track the Bloomberg US Aggregate Bond Index over the short-to-intermediate term interval that it’s been calculated, oftentimes achieving the same results or, if they vary, the results deviate by no more than one to two basis points in either direction.