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
