Sustainable Investing Monitor-October 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 September with $374.1 billion in net assets across a combined total of 1,209 funds representing 1,001 mutual funds/share classes and 208 ETFs. This compares to last month’s 1,238 funds/share classes and a net drop of 29 funds/share classes, largely due to fund liquidations and in one instance, a fund merger. This represents an uptick from last month’s decline of seven funds/share classes, the smallest monthly decline in the number of mutual funds/share classes and ETFs so far this year.
The reading of assets under management this month 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 August increase of $6.5 billion, or a gain of 1.8%, is attributable to a combination of capital appreciation as well as cash outflows as sustainable long-term funds posted an average total return of 2.5%. Exchange traded funds contributed a net of $4.9 billion in assets in September, for a 3.9% increase, while the assets of mutual funds expanded by $1.6 billion, or 0.8%.
Using a simple back of the envelope calculation, the gains achieved by sustainable long-term funds in September were entirely attributable to capital appreciation of about $9.3 billion. Offsetting this amount were negative flows in the amount of about $2.8 billion.
From the start of the year, combined assets under management increased by almost $21 billion, or 6.0%. The increase was largely attributable to net gains by ETFs that added some $17.3 billion while the larger mutual funds segment added about $4 billion.

New Sustainable Fund Launches

Focused sustainable new fund listings remain dormant.  There were no new sustainable fund listings recorded in September, the fifth month this year with zero listings.  Year-to-date, seven new fund launches were documented (excluding new share classes), compared to eight new listings during the same period in 2024 and 64 in 2023. Of the seven new listings this year, four were ETFs and three were mutual funds (Note: Chart reflects an April mutual fund launch adjustment).  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 previously, the number of focused sustainable funds/share classes dropped by a net of 29 funds/share classes, largely due to fund liquidations and in one instance, a fund merger. The liquidation of 14 funds/share classes involved firms that withdrew from offering focused sustainable fund products, including MassMutual, NexPoint Asset Management and Vontobel Asset Management. This further reduced the number of firms offering focused sustainable mutual funds and ETFs to 121 firms.  In addition, BlackRock liquidated four funds/15 share classes while Calvert merged one fund. (Note: Net declines reflect data adjustments covering prior period activities.).         

Green, Social and Sustainability Bonds Issuance (to September 30, 2025)  

According to SIFMA, global sustainable bond issuance in the third quarter, including green bonds, social and sustainability bonds, hit $212.9 billion, a decline of $13.9 billion or 6.1% relative to the second quarter.  Issuance was bolstered in September when global volume reached $96.3 billion, the highest monthly volume so far in 2025.  September reflected a strong pick up relative to July and August issuances of $59.7 billion and $56.8 billion, respectively. 

Year-to-date, global issuance reached $678.7 billion, a decline of $44.1 billion, or 6.1%, versus the same period during the first nine months of 2024.   

In contrast to a decline in global issuance during the third quarter, US sustainable bond volumes recovered from the dip in the second quarter.  US green, social and sustainability bond issuances reached $54.6 billion, up $16.5 billion, for an increase of 43.1% relative to the second quarter.  This was during a quarter when total US bond market issuance, at $2.8 trillion, dropped by 0.3%.  US sustainable bonds new issuances in the quarter were lifted by the second highest monthly issuance level in 2025 when $20.5 billion in new bonds came to market in September.  In addition, year-to-date issuance exceeded the levels reached during the comparable period last year, $148.2 billion versus $126.5 billion, for an increase of $21.7 billion or 17.1%. 

Based on year-to-date volumes and assuming no change in issuance patterns over the final three months of the year, sustainable debt volume could reach about $900 billion in 2025 and exceed last year’s level of $866.2 billion. 

It should be noted that SIFMA’s data does not include sustainability linked bonds, sustainability linked notes and transition bonds.  (Note:  Prior period quarterly data reflect any latest adjustments).       

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

In September 2025, equity markets extended earlier gains, with the S&P 500 up 3.65% and technology/mega-cap names powering much of the advance. International markets also posted solid gains, particularly in emerging markets and China, which was up 9.75% and 41.62% year-to-date. On the fixed income side, bonds generally rallied modestly as yields retreated after the Federal Reserve moved to cut rates. Over the third quarter, U.S. equities rose 8.12%, international equities likewise posted strong returns, and bonds delivered positive albeit more modest returns. Year-to-date, foreign equities, especially emerging market equities, have outpaced U.S. stocks, while core bond returns have benefited from the easing in yields. Over the trailing 12 months as well, equities have generated healthy double‐digit returns and bonds have recovered some ground. 

Looking ahead, the durability of earnings growth, the Fed’s next moves, inflation dynamics, and global macro risks (e.g. China, Europe) will largely shape returns — caution is warranted amid elevated valuations and potential volatility.  In addition, focused long-term sustainable funds added an average of 2.52% in September, with international funds delivering an average gain of 3.09%, U.S. equity funds added 2.25%, and taxable bond posting an average increase of 0.80%.

Against this backdrop, four of six selected MSCI sustainable indices, chosen to represent a broad cross section of the sustainable investing market segments, outperformed their conventional counterparts in September, the first time this year that more than three of the selected indices outperformed the monthly results achieved by their conventional counterparts.  The only index that lagged is the MSCI USA Small Cap Selection Index that posted a return of 1.26% in September while its underlying index, the MSCI USA Small Cap Index, delivered a return of 1.84%, or a negative differential of 58 basis points (bps).  At the same time, the Bloomberg Barclays MSCI USA Aggregate ESG Focused Index was even with its underlying Bloomberg US Aggregate Bond Index at 1.09%. 

Interestingly, the reverse is true when relative results are examined over the year-to-date and trailing 12-month basis.  In each case, four of the five sustainable stock indices underperformed while the MSCI Emerging Markets Selection indices outpaced their conventional counterparts by 4.4% and 5.44% since the start of the year and over the trailing 12-months. With very narrow margins, the Bloomberg Barclays MSCI USA Aggregate ESG Focused Index outperformed during the same intervals.  

Over the intermediate and long-term horizons, the performance results registered by sustainable equity indices generally lag conventional benchmarks. Two exceptions are the MSCI USA Selection Index that outperformed its conventional counterpart over the past three, five and ten years and the MSCI Emerging Markets Selection Index that is ahead of the MSCI Emerging Markets Index over the trailing three and 10-year intervals but lagging over the five-year period.  Consistently, the Bloomberg Barclays MSCI USA Aggregate ESG Focused Index has been generating a return in line with or very narrowly outside its underlying benchmark.