Sustainable Investing Monitor-December 2023

Net Assets:  Sustainable Mutual Funds and ETFs 

Sustainable assets under management attributable to mutual funds and ETFs gained $22.0 billion in net assets in November, after sustaining drops for three consecutive months, largely benefiting from market appreciation that saw large cap stocks post a gain of 9.1%, per the S&P 500, while investment grade intermediate bonds registered a gain of 4.5%.  This was the largest monthly gain in 2023 and brings assets under management within $11.1 billion of the month end high reached in July.  Mutual funds added a net of $12.8 billion while ETFs gained $9.2 billion.  Based on a simple calculation, outflows were limited to an estimated $1.0 billion in November.    

New Sustainable Fund Launches

One new ETF was launched in November, bringing the year-to-date fund launch total to 66, or 22 fewer fund launches as compared to 88 launches in 2022, or a 25% decline.  Ten new funds were launches in November of last year, including nine ETFs and one mutual fund.   No new mutual funds were launched in November, excluding new share classes.  Fund launches began to fall off relative to 2022 starting in April of this year.         

Green, Social and Sustainability Bonds Issuance (Q3 2023)

Green, social, and sustainability bond issuance data covering Q3 2023, compiled by SIFMA, reflects a decline in issuance globally and in the US.  Issuance dropped to $163 billion in Q3, for a decline of $97 billion or 41% as compared to the second quarter.  Cumulative 2013 issuance reached $603.8 billion, and based on average quarterly issuance of $201 billion, it looks like the hoped for $1.0 trillion issuance level is unlikely to be reached in 2023.   

Relative Performance:  ESG Indices vs. Conventional Indices

Positive sentiment pushed stock prices higher in the US and overseas while bond prices gained as yields declined sharply.  Sustainable mutual funds and ETFs posted an average gain of 7.55% in November, with equity funds adding an average of 9.3% and bond funds recorded an average gain of 4.1%. 

Against this backdrop, a selection of six ESG indices published by MSCI that emphasize high ESG scores (Leaders indices) experienced mixed results in November, as three ESG indices outperformed their conventional counterparts while three indices underperformed. Over the trailing twelve months only two ESG indices outperformed.  Not shown on the chart, but over the past three years only one ESG index outperformed while three ESG indices did so over the trailing five years.