Bottom Line: Investors gained five thematic funds with a key focus on the environment and decarbonization, but other more seasoned lower cost options are available.
Summary and observations
Seven new sustainable investment funds¹, including five actively managed ETFs and two mutual funds were launched in August and at least 29 new sustainable ETFs as well as mutual funds were registered with the SEC during the same month. Investors gained five thematic funds with a key focus on the environment and decarbonization. The other two newly launched funds employ an ESG integration approach to investing that emphasizes minimum ESG thresholds. Refer to Table 1. The new funds are small in size, averaging $3.7 million in net assets and ranging from $0 to $10.2 million for the Hartford Schroders ESG US Equity ETF that likely includes at this stage some of the sponsor’s seed money. Further, the funds, with one exception, are offered to investors at higher than mean level expense ratios². The one exception is the Hartford Schroders ESG US Equity ETF that charges 39 bps. Given that other more seasoned lower cost options are available, for now, investors are directed to consider alternative currently available investment opportunities.
Sustainable funds added $14.3 billion in net assets
On a combined basis, sustainable funds, a total of 1,067 mutual funds and ETFs according to Morningstar, added $14.3 billion in net assets during the month, to end August with $348.4 billion in assets. Of the sum added in August, $8.2 billion is sourced to mutual funds that ended the month with $236.3 billion. The remainder, or $6.1 billion, is attributable to sustainable ETFs that closed the month at $112.1 billion, or 32.2% of the total.
Almost two-thirds of the net assets gain by ETFs in August was achieved by five funds that gained $3.8 billion.
The top five mutual funds accounted for a combined net assets gain in the amount of $2.9 billion, or 35% of the net increase achieved by mutual funds. At the same time, the largest five withdrawals from mutual funds reached $120.3 million. Refer to Table 2. On the other hand, the uptake in ETF assets was more concentrated as almost two-thirds of the gain in August was achieved by five ETFs that attracted a net total of $3.8 billion. The five largest drawdowns deducted $549.8 million. Refer to Table 3.
Sustainable mutual funds and ETFs across all asset classes posted an average total return gain of 1.9%
Sustainable mutual funds and ETFs across all asset classes, a universe of 1,069 funds, gained an average 1.9% with results ranging from a high of 22.52% recorded by the newly launched $10.2 million Viridi Clean Energy Crypto-Mining and Semiconductor ETF to a low of -4.24% posted by Krane UBS China A Shares Fund I. Mutual funds posted an average gain of 1.93% while ETFs scored a slightly higher average gain of 2.22%.
29 registrations filed with the SEC in August
As noted above, more funds are slated for launch in the coming months, based on SEC registrations during the month of August alone. Of 29 registrations, 15 involved new ETF launches, including funds to be offered by BlackRock, Federated Hermes, Invesco, and JP Morgan and State Street Global, to mention just a few. In addition, 14 new sustainable mutual funds were also registered with the SEC, to be launched by firms such as BlackRock, Columbia, Eaton Vance, Goldman Sachs and RBC.
|Fund Name/Manager||Mutual fund/ETF||AUM($ MM)||Expense Ratio (bps)||Sustainable Investing Apporach|
|BlackRock Future Climate and Sustainable Economy ETFBFA||ETF-Active||5.1||70||Thematic fund, focusing on low carbon economy. Fund combines ESG integration, exclusions and engagement practices.|
|Hartford Schroders ESG US Equity ETFHartford Funds Management Company, LLC sub-advised by Schroder Investment Management North America and Schroder Investment Management North America Limited||ETF-Active||10.2||39||ESG integration anchored by minimum ESG thresholds, combined with exclusions.|
|Nuveen Winslow Large-Cap Growth ESG ETFNuveen Fund Advisors, LLC, sub advised by Winslow Capital Management, LLC||ETF-Active^||5.2||64||ESG integration with ESG scores that must meet minimum ESG standards combined with engagement in some cases as well as exclusions.|
|Ninety One Global Environment INinety One North America, Inc.||MF-Active||0||90||Thematic with a focus on companies that contribute to positively to environmental change.|
|Regnan Global Equity Impact JOHCM (USA) Inc. (the “Adviser”).||MF-Active||2||89||Thematic with a focus on companies that have the potential to contribute to the world’s major social and environmental challenges.|
|Spear Alpha ETFSpear Advisors LLC||ETF-Active||2.1||75||Thematic with a focus on companies poised to benefit from breakthrough innovation in industrial technologies, including a focus on companies with an environmental focus and decarbonization. ESG is factored into decision making.|
|Virtus Duff & Phelps Clean Energy ETFVirtus ETF Advisers LLC, sub-advised by Duff & Phelps Investment Management Co.||ETF-Active||1.3||59||Thematic with a focus on clean energy.|
|ETF Name||AUM ($)||Net Additions||Mutual Fund Name||AUM ($)||Net Additions|
|iShares ESG Aware MSCI USA ETF||22,884,931,085||2,183,429,719||Parnassus Core Equity||31,013,702,773||1,253,758,014|
|Xtrackers EM CarbReduc & ClimtImprvs ETF||496,269,344||486,356,854||Vanguard FTSE Social Index||15,202,986,173||727,621,524|
|iShares MSCI USA ESG Select ETF||3,966,684,051||415,810,328||Brown Advisory Sustainable Growth||6,533,818,476||455,261,168|
|Vanguard ESG US Stock ETF||5,248,813,500||359,336,217||DFA US Sustainability Core 1||5,412,846,745||230,214,190|
|iShares ESG Aware MSCI EAFE ETF||6,662,682,037||350,103,758||Parnassus Endeavor||5,252,344,844||206,791,142|
|AUM ($)||Net Withdrawals||Mutual Fund Name||AUM ($)||Net Withdrawals|
|ALPS Clean Energy ETF||941,051,611||(20,657,766)||Appleseed Investor||108,508,808||(6,426,258)|
|Invesco Wilder Hill Clean Energy ETF||1,878,440,759||(36,876,104)||JPMorgan Small Cap Sustainable Ldrs||333,761,503||(7,671,475)|
|Invesco Solar ETF||3,211,858,112||(138,650,094)||Eventide Limited-Term Bond||176,012,691||(12,859,681)|
|iShares ESG Aware MSCI EM ETF||7,107,035,970||(149,616,375)||AMG GW&K ESG Bond||893,019,337||(29,906,850)|
|WisdomTree Emerging Mkts ex-State-Owned Enterprises ETF||4,573,289,602||(203,969,499)||UBS International Sustainable Equity||373,255,557||(63,389,531)|