Sustainable Investing Monitor-March 2026

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

Benefiting from market appreciation for the second month in a row but still experiencing net outflows, the total net assets of focused sustainable long-term funds, including mutual funds and ETFs (excluding money market funds), based on Morningstar classifications, experienced an increase in February and closed the month with $383.3 billion in net assets.  This was across a combined total of 1,140 funds/share classes representing 329 mutual funds/947 share classes and 193 ETFs, reflecting another monthly decline in the number of funds/share classes from 972 funds/share classes and 196 ETFs.  The decline is attributable to fund liquidations/delistings and/or rebrandings.  

Total focused sustainable long-term mutual fund assets gained $1.5 billion in February, registering a narrow but still positive 0.4% increase.  Using a back of the envelope calculation, both long-term mutual funds and ETFs experienced cash outflows totaling an estimated $3.9 billion, with mutual funds accounting for 89% or so of the outflows. Estimated net outflows for mutual funds were $3.5 billion while ETFs sustained net outflows in the amount of $0.45 billion. That said, not all categories of mutual funds and ETFs are experiencing outflows. According to ICI Research, environmentally focused funds continue to benefit from inflows.  ICI Research data tracks mutual funds and ETFs that invest according to ESG criteria based on a broader set of definitions, reporting that assets of ESG funds reached $629 billion at the end of January, the latest month for which data is available.  

New Sustainable Fund Launches: 2024 – Present

There were no new funds launched in February 2026, based on Morningstar reporting, which was also the case in the previous month and compared to February 2025.  The drop-off in new listings continues to reflect the dramatic slowdown in new focused or labeled long-term sustainable fund offerings, starting in mid-2023 to-date, coincident with a political backlash against ESG investing and some diminishing level of investor response to ESG-labeled fund products. That said, as noted above, ICI Research indicates that environmentally focused funds continued to benefit from cash inflows. 

During the month of February four mutual funds/20 share classes were liquidated while 3 ETFs were either liquidated or rebranded.  These involved offerings by Invesco, Goldman Sachs, Neuberger Berman and DWS Xtrackers. In most cases, these actions seem to have been taken with respect to funds that failed to achieve scale, consistent perhaps with year-end product rationalization decisions common across asset managers and against the continuing backdrop of a political backlash against ESG and some level of diminished investor appetite for such products. In the case of Invesco and Goldman Sachs, in particular, another contributing factor may have been prior regulatory scrutiny regarding each firm’s ESG claims. 

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

Full Year 2025: The Headline Numbers

Note: Statistics regarding sustainable debt issuances varies by data source in large part due to the nature of coverage and definitions of terms.

Based on Bloomberg BNEF data and a broader definition of sustainable debt that includes loans, ING Research reported total global sustainable finance issuance (excluding asset-backed securities) of $1,539 billion in 2025, a modest decline from $1,668 billion in 2024, but comfortably above the 2023 level. Separately, Bloomberg Intelligence data showed that global green bond and loan issuance hit a record $947 billion in 2025.  Using a separate set of data that includes the issuance of green, social, sustainability, and sustainability-linked bonds, the Climate Bonds Initiative (CBI) reported that aligned cumulative volume through the end of 2025 reached $6.8 trillion.  Annual aligned issuance, according to CBI, surpassed $1 trillion for the third consecutive year, with more than 400 new issuers entering the sustainable debt market in 2025.

On a broader basis that includes all self-labeled issuance regardless of alignment with CBI’s science-based methodologies, Climate Bonds had recorded $8.1 trillion in cumulative green, social and sustainability bonds and sustainability-linked bonds (SLBs) (collectively GSS+) volume by end of 2025, of which $6.8 trillion (83%) was found to be aligned.

2025 Issuance by Product Type

Green-labelled bonds remained the dominant segment, accounting for 64% of aligned GSS+ issuance in 2025 and surpassing $4 trillion in cumulative issuance. In 2025 alone, green bonds totaled $653.5 billion, the second-highest annual volume on record. Sustainability bonds recorded $217.3 billion in annual issuance, while social bonds reached $141.2 billion. Sustainability-linked bonds showed renewed growth, with aligned issuance rising to $14 billion, a 46% increase year-on-year.

Key Themes & Trends in 2025

-Energy transition debt surged: BNEF reported energy transition debt issuance totaled $1.2 trillion in 2025, up 17% from 2024, credited to growth in corporate and project finance flows, each up 20% respectively.

-Issuer type divergence: The steepest year-on-year drop in sustainable issuance came from corporates, followed by a milder dip from governments, while financials and supranationals both saw year-on-year growth.

-Sustainability-linked loans softened: Sustainability-linked loan (SLL) issuance registered a visible decline year-on-year, though ING noted that BNEF data may be highly under-reported due to many private deals not yet added to the dataset.

-First Tokyo resilience bond: The world’s first Climate Bonds Certified resilience bond was issued by the Tokyo Metropolitan Government in 2025, demonstrating strong investor demand for credible climate adaptation investments.

Early 2026 (January–February) — Preliminary Activity

Formal aggregate statistics for Q1 2026 are not yet published, but market signals are encouraging:

-France increased the amount it can potentially raise from green bonds in 2026 to €23 billion, laying the foundations for potentially record-breaking annual volumes from the major sovereign issuer.

-The UK announced plans to raise at least £12 billion from green gilts in the upcoming year.

-Early 2026 loan data show the sustainability-linked label making up 53% of labeled loan issuance so far in 2026, down from over 70% seen in 2020–2024, possibly reflecting a shift toward green loans.  That said, under-reporting of late-2025 SLL deals could be a factor.

Full Year 2026 Outlook

ING Research forecasts that global sustainable finance issuance will rise to approximately $1,621 billion in 2026, with green bonds expected to reach $700 billion and green loans to reach $255 billion.

Moody’s forecasts global sustainable bond issuance (bonds only, excluding loans) of $900 billion in 2026, broadly flat from 2025, comprising $530 billion of green bonds, $190 billion of sustainability bonds, $115 billion of social bonds, $40 billion of transition bonds, and $25 billion of sustainability-linked bonds.

Europe is estimated to account for approximately 42% of new sustainable bond issuance volume in 2026, supported by significant refinancing needs as record sustainable bond maturities come due — particularly in the green bond segment.

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 volume was recorded in 2021($911.3 billion) and in 2024 ($874.0 billion). Green bonds accounted for 63% of the volume, slightly higher than the 62% in 2024, followed by sustainability bonds at 25% and social bonds at 12%.    

In the US, sustainable debt volume 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 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).     

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

Markets in Review. February proved to be a month of rotation as investors continued their shift away from mega-cap U.S. technology stocks, with market performance diverging sharply depending on where investors chose to look.  Markets were buffeted by multiple crosswinds during the month, from positive economic data and signs of cooling inflation to reactions to the US Supreme Court ruling on the reliance on the International Economic Emergency Powers Act to levy reciprocal tariffs, to increasing tensions between the US and Iran that led to open hostilities after the month closed.    

U.S. Equities.  U.S. equities delivered mixed results. The S&P 500 slipped 0.76% while the Nasdaq 100 fell approximately 2.3%, its worst monthly decline since March 2025. The primary drag was a sharp pullback in mega-cap technology and AI-adjacent names, reflected in the 7.3% drop recorded by the Magnificent Seven Index as investors reassessed stretched valuations. The Dow Jones Industrial Average, less exposed to growth tech, edged up 0.3%. Beneath the surface, however, the picture was more constructive. The S&P 500 Equal Weight Index rose by 3.5%, its best month since May 2025, while the S&P MidCap 400 gained 4.1% and the S&P SmallCap 600 added almost 2.2% after picking up 5.6% the previous month, reflecting a genuine broadening of market participation toward value among large cap stocks, in particular, energy, materials and consumer staples, as well as small caps. The small cap index registered a 12-month gain of 17.9% versus 17% for the S&P 500 Index.   

International Equities.  International equity funds outshone their U.S. counterparts. The MSCI ACWI ex US posted a strong gain of 5.02% while Pacific and Far East developed and emerging markets stocks continued their impressive streak, particularly South Korea and Taiwan that benefited from robust semiconductor demand tied to the ongoing AI infrastructure buildout.  Emerging markets delivered even stronger results, adding 5.5% and bringing up the gains over the trailing twelve months to an outstanding 50%. 

Bonds.  Bonds rallied meaningfully as the 10-year Treasury yield fell 29 basis points to 3.97%, one of the largest monthly drops in a year. Moderating inflation expectations and growing conviction around future rate cuts drove the move, with the Bloomberg U.S. Aggregate Bond Index posting modest gains. High-yield bonds, however, slipped slightly amid private credit default concerns.

Sustainable mutual funds and ETFs. Bolstered by the performance of international equity and taxable fixed income funds, focused long-term sustainable mutual funds and ETFs gained an average of 1.40% in February. Returns across all funds ranged from a low of -13.86% recorded by a fund investing in European carbon allowances to a high of 11.32% by a fund leading a cohort of the top ten performing funds in February that stand at the intersection of the global energy transition, critical mineral supply chains and next generation technology infrastructure.  

International equity funds gained an average of 3.2% while taxable bond funds added 1.0%. US equity funds lagged but managed to squeeze out a gain of 0.03%.   

Near-term results posted by selected sustainable indices. Just like last month, only one of six MSCI sustainable indices, 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, outperformed its conventional counterpart in February.  This month, however, it was the MSCI USA Small Cap Selection Index that outperformed its conventional counterpart, beating it by 76 basis points (bps).  The same index led its conventional MSCI USA Small Cap Index counterpart for the trailing three-months by 3 bps, but this was not the case on a year-to-date or trailing twelve-month intervals when the index lagged by 17 and 481 bps, respectively.  At the same time, the three international indices, the MSCI ACWI ex USA Selection Index, the MSCI EAFE Selection Index and the MSCI Emerging Market Selection Index each again trailed its conventional counterpart in February by 131 bps, 51 bps and 293 bps, respectively.  On the other hand, the Bloomberg MSCI US Aggregate ESG Focus Index produced results in line with its conventional benchmark, the Bloomberg US Aggregate Bond Index.  It also matched its conventional counterpart over the year-to-date and three-month intervals while beating its conventional benchmark by 3 bps over the full one-year time horizon to the end of February.        

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

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.