Chart of the Week: August 24, 2026: Labeled sustainable infrastructure funds

Observations:  

• Like other some other sector equity funds, the small labeled sustainable infrastructure funds segment, consisting of seven funds (eight share classes), can experience significant month-to-month volatility as well as variations in performance within the segment. This was the case in July. For example, the First Trust NASDAQ Clean Edge Smart Grid Infra ETF (GRID) posted a negative 6.10% return in July but registered a 16.9% gain in April of this year. As a group, the labeled sustainable infrastructure funds appear more volatile, on average, recording a 5.3 monthly 3-year standard deviation of returns as compared to 3.8 for the S&P 500. [This is attributable in large part due to the small segment size and a skewing of the average results due the high volatility recorded by the small $0.5 million Xtrackers US Green Infrastructure Select Equity ETF (UPGR)]. At the same time, the dispersion of returns within the group of infrastructure funds can be high. In July, returns ranged from -14.8% to a positive 0.55%. Intermediate term results (3-years) also reflect a wide dispersion of returns within the group.

• In the case of labeled sustainable infrastructure funds, the seven funds sit at very different points on a spectrum that runs from defensive, regulated “core” infrastructure to speculative, early-stage clean-technology growth equity, and that positioning, more than any single factor, explains the dispersion in monthly returns.

• Core infrastructure vs. thematic growth. Principal Global Listed Infrastructure (PGSLX), the best performer for the month (+0.55%), holds regulated utilities, railroads and pipelines. Its largest positions include NextEra Energy, Williams Companies, CSX, Entergy and Sempra. These are bond-proxy, cash-generative businesses whose share prices move mainly with interest rates and regulatory decisions, not with sentiment swings. Cromwell Foresight Global Infrastructure (PGSLX) and Impax Global Sustainable Infrastructure (BLDX) sit in a similar middle ground, blending utilities and digital/transport infrastructure with a smaller allocation to energy-transition names, which produced modest single-digit monthly moves in either direction. At the other end, UPGR and, to a lesser degree, the Redwheel Next Generation Power Infrastructure (ECOAX) hold early-stage clean-energy technology and renewable power developers whose valuations are far more sensitive to sentiment, policy headlines and single-company news.

• A specific catalyst drove the worst outlier. UPGR’s -14.80% month was not attributable to a broad market move, rather its portfolio was concentrated in a handful of volatile holdings. FuelCell Energy (10.6% of the portfolio) and Bloom Energy (3.6%) are both hydrogen/fuel-cell names that had rallied sharply earlier in 2026; financial media reported repeated double-digit single-day swings in these stocks through July 2026 as investors took profits and “unwound” the prior run-up (FuelCell Energy fell as much as 24% in a single session; Bloom Energy fell 8-14% on multiple days). Because UPGR holds only 45 stocks and is 57% weighted to industrials with an outsized single-stock position in FuelCell Energy, that stock-specific volatility passed through almost directly into the fund’s monthly return.

• Fund size and concentration amplify moves. The funds with the most extreme monthly returns are also, not coincidentally, the smallest or relatively smaller and most concentrated. UPGR manages $0.6 million in net assets and holds 45 positions, so a small number of trades or a handful of volatile constituent stocks can move the fund’s return materially more than would be the case in a larger, more diversified vehicle. Cromwell at $55.5 million in net assets and 38 holdings who’s top 10 securities account for 36.7% of assets and iShares Environmental Infrastructure and Industrials ETF (EFRA) with $5.7 million in assets and 79 holdings are similarly more concentrated than the largest fund in the group. By contrast, GRID’s $11.7 billion in assets and 128 holdings provide far more internal diversification, even though GRID itself is a higher-volatility, thematically concentrated strategy. Its -6.10% return in July reflects a broad pullback in smart-grid and clean-technology equipment names such as Schneider Electric, Eaton and ABB, alongside technology-adjacent holdings like NVIDIA and Tesla, rather than a single-stock event.

• Passive index tracking vs. active management. GRID, UPGR and (EFRA) are passively managed, fully replicating niche thematic indices (the Nasdaq Clean Edge Smart Grid Infrastructure Index, the FTSE Green Revenues Select Infrastructure and Industrials Index, and the Solactive United States Green Infrastructure ESG Screened Index, respectively), so they carry the full sector and single-stock skew embedded in those indices with no manager discretion to trim a volatile position. Cromwell, Impax, Principal and Redwheel are actively managed, giving their managers latitude to diversify away from the most volatile pockets of the sustainable infrastructure universe, one reason the actively managed funds cluster closer to the middle of the return distribution.

• Different benchmarks, different economic exposures. Principal benchmarks to the FTSE Global Core Infrastructure 50/50 Index, which requires constituents to derive at least 65% of revenue from core infrastructure activities (utilities, transport, energy), a deliberately conservative, revenue-tested definition. Cromwell benchmarks to the S&P Global Infrastructure Index. The thematic ETFs (GRID, EFRA, UPGR) and the actively managed transition-focused strategies (Impax, Redwheel) instead target companies enabling or benefiting from the energy transition — a broader, faster-growing but more cyclical and sentiment-driven opportunity set. That structural difference in what counts as “infrastructure” is the single biggest reason the group’s returns diverge as much as they do, both month to month and, more strikingly, over three years (from GRID’s +20.64% annualized to UPGR’s -0.83% annualized).

• All seven thematic funds are further differentiated along four sustainable investing approaches. Based on their primary sustainability approaches, the seven labeled infrastructure funds qualify as thematic funds that are further differentiated along four practices, as follows: 1. Pure thematic/sector product pursuant to which stock selection is driven entirely by business-activity classification (GRID). 2. Thematic funds focused on energy transition/decarbonization where sustainability is the core thesis (BLDX and ECOAX). 3. Thematic funds that employ ESG integration, i.e. financially material ESG factors (CFGIX and PGSLX) and 4. Thematic funds that employ positive/negative screening and exclusions (EFRA and UPGR).