Sustainable Investing Monitor-February 2026

Long-Term Net Assets: Focused Sustainable Mutual Funds and ETFs 

Benefiting from market appreciation but still experiencing net outflows, the total net assets of focused sustainable long-term funds attributable to mutual funds and ETFs (excluding money market funds), based on Morningstar classifications, experienced an increase in January and closed the month with $381.9 billion in net assets.  This was across a combined total of 1,163 funds/share classes representing about 321 mutual funds/972 share classes and 196 ETFs, reflecting another monthly decline in the number of funds and share classes.   

Total focused sustainable long-term mutual fund assets gained $7.3 billion in January, for an increase of 1.9%.  Much of that gain is attributable to ETFs.  The segment recorded a gain in assets in the amount of $6.2 billion, or 4.6%.  Using a simple back of the envelope calculation, ETFs enjoyed net inflows in the amount of $1.4 billion.  On the other hand, mutual funds gained $1.1 billion in assets, or 0.5%, while experiencing net outflows of about $3.9 billion.

New Sustainable Fund Launches

There were no new funds launched in January 2026 which was also the case in January 2025 versus one new ETF launch in January 2024. The drop-off in new listings continues to reflect the dramatic slowdown in new focused sustainable fund offerings, starting in mid-2023 to-date. 

Also in January, there were several fund liquidations and re-brandings, including, for example, liquidations due to lack of traction by AB Global, Boston Partners Global, Cromwell Investment Advisors and Franklin Templeton Investments.  At the same time, the $100.2 million John Hancock ESG Large Cap Core Fund was reorganized into the John Hancock Fundamental Large Cap Core Fund, and Impax Asset Management converted its Impax Global Sustainable Infrastructure Fund into the Impax Global Infrastructure ETF that was listed on February 2, 2026.  While the ETF dropped the sustainable reference from its name, the actively managed fund continues to follow a sustainable investing approach, investing in companies that the adviser believes are well positioned to provide infrastructure essential for the transition to a more sustainable global economy, integrating environmental, social, and governance (ESG) analysis into portfolio construction. 

Green, Social and Sustainability Bonds Issuance (to December 31, 2025)  

According to SIFMA, global debt (including green, social and sustainability bonds) issuance reached $850.8 billion versus $874 billion in 2024, or a decline of 2.7%. While narrowly lower, this is still the third highest dollar volume recorded since 2020.  During this six-year interval, the highest volumes were recorded in 2021($911.3 billion) and in 2024 ($874.0 billion). Green bonds accounted for 63% of the volume in 2025, slightly higher than the 62% in 2024, followed by sustainability bonds at 25% and social bonds at 12%.   

In the US, sustainable debt volume actually picked up, rising from $166.3 billion issued in 2024 to $179.3 billion last year, or an increase of 7.8%.  This was the highest level of issuance achieved in the US since 2020, exceeding last year’s $166.3 billion and $152.5 billion issued in 2021. Still, the increase fell short of the 9.2% gain recorded by total long term bond issuance in the US which reached $11.3 trillion, up from $10.3 trillion in 2024. Unlike the global profile, 56% of US sustainable debt issuance in 2025 was attributable to sustainability bonds while 33% was in the form of green bonds. 

It should be noted that SIFMA’s data does not include sustainability linked bonds, sustainability linked notes, transition bonds and loans that are now tracked and now account for almost 50% of the sustainable debt market. (Note: Prior period quarterly data reflect any latest adjustments).     

According to preliminary data published by Environmental Finance, sustainable bond and loan volumes are estimated to have fallen by a fifth to around $1.6 trillion in 2025.  It is further estimated that final sustainable debt volumes for 2025 will be between $1.63 trillion and $1.66 trillion, down from the record $2.03 trillion recorded in 2024. This includes any transactions labelled as green, social, sustainability, sustainability-linked or transition bonds and loans as well as sub-labels such as blue, gender, and nature debt.  Sustainable bond volumes are expected to be between $848 billion and $871 billion, with sustainable loan volumes between $782 billion and $793 billion.   

Short-Term Relative Performance: Selected Sustainable Indices vs. Conventional Indices

Market overview.  While January was volatile for financial markets, given heightened geopolitical tensions following the US military actions in Venezuela, investors’ appetite for risk increased. Global equities rose almost 3% during the month, based on the MSCI ACWI Index (NR) that tracks large and mid-cap companies, while global bonds posted positive but narrow results.  

US equities.  In the US, the S&P 500 finished up 1.45%, briefly climbing above 7,000 for the first time, reflecting early-year optimism. The Dow Jones Industrial Average gained 1.8%, extending its rally to nine consecutive months and marking the benchmark’s best streak since 2018. The Nasdaq Composite rose more modestly, up 0.97%. Key drivers included constructive Q4 earnings, strength in energy and precious metals, and ongoing enthusiasm around AI. However, technology stocks faced mid-month volatility from sector rotation and regulatory concerns. Diversification away from US large caps continued to play out. Within the US, small caps had a strong start to the year, up over 5% according to the Russell 2000 Index, while the Magnificent Seven stocks rose only 1% in January.  At the same time, value outperformed growth stocks across the range of large cap, mid cap and small cap stocks.  The Federal Reserve held its interest rate target range at 3.50–3.75%, balancing inflation pressures, with CPI around 2.7% year-over-year, against a resilient labor market. 

International stock markets.  International markets, up 5.98% according to the MSCI ACWI ex USA Index, posted the best performance results since November 2023 as economic and inflation data reflected better than expected outcomes. The index was powered by the performance of emerging markets, followed by developed markets in Asia, ex Japan (+8.21%) and (Europe (+5.22%) as European equities hit record highs. Emerging markets had a very strong month, up 8.85%, per the MSCI Emerging Markets Index, boosted by results in Latin America (+15.33%), Eastern Europe (+8.91%) and Asia, ex Japan (+8.27%).  

Bond markets.  U.S. Treasury yields rose modestly across the curve in January, with 2-year and 10-year maturities up 5 basis points and 8 basis points, respectively, as markets adjusted to shifting economic data. Municipal bonds delivered positive returns, supported by lower supply and strong demand. The Bloomberg US Aggregate Bond Index was up 0.11% while global bonds were up 0.94%.

Sustainable funds. Focused sustainable long-term mutual funds and ETFs posted an average gain of 2.33% in January.  International equity funds led with an average increase of 4.41% while US equity funds added 1.60% and taxable fixed income funds recorded a narrow average return of 0.36%.  The best performing investment categories included the Miscellaneous Sector, largely consisting of funds investing in clean and alternative energy (+9.7%), Natural Resources funds (+8.9%) and Diversified Emerging Markets funds (+8.7%).  At the other end of the range, laggards included Health funds (-2.0%), Commodities Focused funds (-1.3%) and Large Growth funds (0.85%).

Near-term results posted by selected sustainable indices. Just one of six MSCI sustainable Selection indices outperformed its conventional counterpart in January.  These indices were chosen to represent a broad cross section of sustainable investing market segments using ESG criteria and exclusions while maintaining sector weight exposures corresponding to counterpart conventional indices, Outperformance was delivered by the MSCI USA Selection Index that continued to outperform its conventional counterpart by 22 basis points (bps).  The same index led its conventional MSCI USA Index counterpart for the trailing three-month and twelve-month intervals by posting excess returns of 7 bps and 3.22%, respectively.  The MSCI USA Small Cap Selection Index and three international indices, the MSCI ACWI ex USA Selection Index, the MSCI EAFE Selection Index and the MSCI Emerging Market Selection Index each trailed its conventional counterpart in January by 94 bps, 51 bps, 19 bps, and 126 bps, respectively.  At the same time, the Bloomberg MSCI US Aggregate ESG Focus Index produced results in line with its conventional benchmark, the Bloomberg US Aggregate Bond Index.  It also led its conventional counterpart over the one-year trailing period by a narrow 3 bps.     

Intermediate-to-long term results posted by sustainable indices. The MSCI USA Selection Index is the only one of the five equity-oriented benchmarks that continues to post consistent outperformance over the three-, five- and ten-year intervals to the end of January. 

With regard to fixed income, the Bloomberg MSCI US Aggregate ESG Focus Index has managed to very closely track the Bloomberg US Aggregate Bond Index over the short-to-intermediate term intervals that it’s been calculated, often times achieving the same results or, if they vary, the results deviate by no more than one to two basis points in either direction.