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
