Sustainable Investing Monitor-October 2026

Long-Term Net Assets of Focused Sustainable Mutual Funds and ETFs: 2025 – 9/30/2026

The total net assets of labeled sustainable long-term mutual funds and ETFs dropped below the $400 billion dollar level again at the end of September, giving up $9.0 billion or 2.3% to reach the end of the third quarter with $392.2 billion. At the same time, the segment experienced another decline in the number of funds due to liquidations, re-brandings and reclassifications–dropping on a net basis from 980 mutual funds/share classes to 972 funds/share classes (432 funds).          

September was an unforgiving month for investors generally, including labeled sustainable fund investors as the sustainable segment gave up an average of 2.23% in September. Mutual funds, with their greater exposure to fixed income funds and securities, posted an average decline of 2.16% while ETFs recorded a drop of 2.55%. Using a back of the envelope calculation (not adjusted for impacts due to liquidations, re-brandings and reclassifications), mutual funds also experienced cash outflows of about $1 billion while ETFs gained almost the same amount.  On a weighted basis, labeled sustainable long-term funds recorded estimated net outflows in the amount of $237 million.   

Since the start of the year, the assets of labeled long-term sustainable mutual funds and ETFs expanded by $17.7 billion, or an increase of 4.7% versus an average total return increase of 7.6% based on funds in operation at the end of September.   

New Focused Sustainable Fund Launches: 2025 – 9/30/2026

There were no new funds listings recorded in September (none since June), and the number of new funds launched since the start of the year remains unchanged at four funds—all ETFs listed in May and June of the year. Since the start of 2025, a cumulative total of 14 new funds came to market.  

The year-to-date tally continues to reflect a scarcity in new listings that extends the dramatic slowdown in new focused or labeled long-term sustainable fund offerings starting in mid-2023 to-date. Contributing factors include, but are not limited to, a political backlash against ESG investing, potentially a diminishing level of response to ESG-labeled fund products as well as compliance with the SEC’s amended Names Rule. The Names Rule that took effect in December 2023 with phased compliance deadlines as early as June 2026 for large-fund groups may also be holding back new fund launches and contributing to fund re-brandings and liquidations. Some of the latest liquidations include the BlackRock Sustainable Aware Advantage Equity Fund, a $12.5 million fund consisting of 3 shares classes and the $34.2 million John Hancock Environmental Opportunities Fund consisting of 4 share classes.  In addition, 7 funds/10 share classes were either renamed by removing the terms “ESG,” “Impact,” or “Sustainable” from the name but at the same time did not make substantive changes to their sustainable practices (5 funds), one fund converted to an ETF form (TCW Securitized Income ETF) and one fund adopted a new index and will no longer take into account any ESG factors or pursue any ESG objectives (Xtrackers Bloomberg Developed Markets ex US Equity ETF).  

Green, Social and Sustainability Bonds Issuance to 9/30/2026 

Global issuance of green, social and sustainable bonds (use of proceeds bonds) in Q3 2026, based on data supplied by SIFMA, reached $261.8 billion, representing a quarter-over-quarter drop of $32.2 billion for a decline of 11%.  Green bonds accounted for almost 74% of the volume during the third quarter while sustainability bonds accounted for 16.1%.  

If the average quarterly volume this year to date attributable to use of proceeds bonds was to be realized in the fourth quarter, use of proceeds bonds would exceed one trillion in issuance in calendar year 2026 and would eclipse last year’s issuance of $860.3 billion.  In the previous four years, issuance in the fourth quarter declined by an average of 22%, ranging between 19% and 31%.  If issuance in Q4 2026 were to decline by the same average level, 2026 issuance could still exceed $1.0 trillion.

In the third quarter, the volume of use of proceeds bonds in the U.S. dropped to $36.6 billion, down from $43.4 billion in the second quarter, a drop of $6.8 billion or -15.7%.  Unlike global issuance, sustainability bonds dominate—accounting for 51.4% of volume in the third quarter while green bonds made up 41.6% of the total.  While U.S volumes have been increasing yearly since 2022 to reach $184.4 billion last year, it seems unlikely that green, social and sustainable bond issuance will reach that level this year. That said, it may be the case that bonds financing environmental and social projects are coming to market in the US, but they are not being labeled as green or social bonds.  

Some of the largest issuers worldwide in the third quarter were all sovereign and supernational issuers, including the Republic of Italy, the European Investment Bank, Kfw, the Kingdom of Spain and the UK.  One of the largest issuers in the U.S. (one that reached the top 10 globally) was QTS Central Issuer LLC (a subsidiary of Blackstone-backed QTS Data Centers) that completed a $3.9 billion investment-grade green bond offering to finance the construction of a three-building AI data center campus in Fayetteville, GA that is being fully leased to Microsoft.   

One unique green bond structure with a twist relative to previously issued green bonds was the HK$20 billion (about US$2.6 billion) tokenized green bond issue, offered in four currencies, the largest digital bond issuance to date and double the HK government’s November 2025 deal.  This is the world’s first digital bond to integrate HKD tokenized deposits into the primary issuance settlement process for the Hong Kong dollar tranche.    

Note: SIFMA data does not cover loans and sustainability-linked bonds.  

S-T Relative Performance of Selected Sustainable Indices vs. Conventional Indices to 9/30/2026 

September was a broadly negative month.  September was a broadly negative month with very narrow leadership. The Federal Reserve raised rates by 25 basis points, its first hike in about three years, and the 10-year Treasury yield climbed to around 5.3%, the highest since 2002. In the process, the Bloomberg US Aggregate Bond Index gave up 2.61%. Energy-driven inflation and rate sensitivity pushed nine of 11 U.S. sectors lower; the Russell 2000 fell 5.25% and the equal-weighted S&P 500 fell 4.81%, while large-cap growth and AI-related technology rose. Global equities were down roughly 1%, international developed markets about 3%.

September favored sustainable indices. Four of the five equity Selection indices tracked by MSCI beat their conventional parents in a down month, by 0.29 to 0.50 percentage points. The exception was U.S. large/mid-caps (−0.44 points). The ESG bond index matched its benchmark to within one basis point.

The year-to-date and 12-month story is dominated by one gap. The MSCI EM Selection Index trailed its parent by 15.62 points over 12 months (13.60% vs. 29.22%). The most likely single cause is the absence of Samsung Electronics — roughly 8.5% of the parent index, and one of the best-performing large stocks in the world over the period — from the Selection index.

Over 3, 5 and 10 years, sustainable investors have given up some return outside U.S. large caps. Four of five equity Selection indices lag their parents over every long-term window. The gap narrows with time: averaged across the five equity pairs it is −1.81 points a year over 3 years, −1.42 over 5 and −0.59 over 10.

The cost is real but modest, and it is not universal. A U.S. large-cap sustainable investor has come out ahead over 3, 5 and 10 years; a core bond investor has given up nothing. For international, EM and small-cap exposure, 10 years of Selection-index returns left an investor with roughly 6–8% less ending wealth than the conventional index.