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Sustainable investment funds performance wrap-up: January 2025
After a challenging December when the broad market gave up 2.38%, stocks got off to a strong start in 2025 with solid gains. The Dow Jones Industrial Average (DJIA) gained 4.78% while the S&P 500 added 2.78% on a total return basis and the NASDAQ 100 posted an increase of 2.25%. Small-cap stocks returned 2.62%,…
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The Bottom Line: The broad stock market recovered from December’s decline while bonds as well as focused sustainable mutual funds and ETFs achieved partial recoveries.
The broad stock market gained 2.78% while bonds added 0.53% in the first month of 2025
After a challenging December when the broad market gave up 2.38%, stocks got off to a strong start in 2025 with solid gains. The Dow Jones Industrial Average (DJIA) gained 4.78% while the S&P 500 added 2.78% on a total return basis and the NASDAQ 100 posted an increase of 2.25%. Small-cap stocks returned 2.62%, value outperformed growth and international stocks also started the year on a positive note. The MSCI ACWI ex USA Index gained 4.03% while the MSCI EAFE Index and emerging market stocks gained 5.26% and 1.79%, respectively. Except for Technology (-0.7%), which suffered a selloff following the emergence of a cheaper to produce AI model by DeepSeek, all sectors rose in January. The best-performing sector in January was Health Care, which advanced 6.8%.
Yields were flat in January. After a steep rise at the start the year during which 10-year U.S. Treasury yields rose to 4.79%, yields fell in the latter half of January, which helped bonds to post positive returns for the month. The 10-year U.S. Treasury yield ended 2024 and January 2025 at 4.58%. At the same time 2-year Treasury yields declined by 3 basis points. The Bloomberg US Aggregate Bond Index gained 0.53% while high yield corporate bonds registered an increase of 1.37%.
Economic data released in January (largely covering December) showed ongoing signs of solid economic growth. While the first reading of the fourth-quarter GDP showed a slowing level of GDP growth at 2.3% annualized growth rate, strong consumer spending and lower jobless claims signaled resilience and reduced expectations for a March interest rate cut. After three consecutive meetings of cuts, the Fed paused in January and the FOMC left policy rates unchanged. This was a widely anticipated move as the Fed is expected to only raise rates once in 2025.
Focused sustainable mutual funds and ETFs posted an average gain of 2.42%, achieving a partial recovery, on average, from December’s 3.25% average drop
Long-term focused sustainable mutual funds and ETFs, a total of 1,380 funds with total net assets at the end of January in the amount of $360 billion, registered a combined average gain of 2.42% for the month and 11.91% over the trailing twelve months. This, in large part, reversed but did not entirely erase the previous month’s 3.25% overall decline.
International equity funds led in January with an average increase of 3.27% while US equity funds narrowly trailed with an average gain of 3.26%. That said, US equity funds gained 20.18% over the previous twelve months while international equity funds added 11.76%.
Taxable bond funds managed to post a monthly increase of 0.74% and 4.14% over the past twelve months while municipal bond funds were up 0.38% in January versus 2.36% from the end of January 2024.
The best performing investment categories were Health, Trading-Leveraged Equity and Mid-Cap Growth that posted average gains of 7.48%, 7.01% and 6.17%, respectively. At the other end of the range, India Equity, Conservative Defense and Equity Energy dropped 4.14%, 2.29% and 0.71%, respectively. Each of these categories tracked a small number of funds.
Performance of ESG indices: Mixed results in January while intermediate-to-long-term results are somewhat disappointing
Based on a selection of five US and international equity ESG Leaders indices and one fixed income benchmark, for a total of six benchmarks constructed by MSCI around ESG screening and exclusionary criteria, two indices outperformed their conventional counterparts in January, three indices underperformed while one index matched its conventional counterpart. Outperforming sustainable indices included the MSCI US Small Cap ESG Leaders Index and the MSCI Emerging Markets ESG Leaders Index that outperformed in January by 41 bps and 35 bps, respectively. For the trailing one-year interval only one ESG index outperformed, namely the MSCI Emerging Markets Leaders Index that pulled ahead by a wide 6.23%. In part, the index benefited from higher exposures to Taiwan and a lower exposure to South Korea and almost 2X the weightings stocks like Taiwan Semiconductor and Tencent Holdings.
Over the intermediate and long-term, the relative performance results posted by the same ESG indices through the end of January are somewhat disappointing. The MSCI Emerging Markets ESG Leaders Index is the only benchmark to outperform over the ten- and five-year intervals to January 2025 with average annual beats of 73 bps and 14 bps, respectively. That said, the index trails over the training 3-year period. The other four equity benchmarks underperformed over the 3, 5 and 10-year intervals. While it has not yet established a 10-year track record, the Bloomberg MSCI US Aggregate ESG Focused Index tracked its underlying benchmark very closely over the three- and five-year intervals. It should be said, however, that the ten 10-year track record attributed to ESG indices is subject to interpretation in the light of significant operational and definitional changes over that time interval. 3-year and 5-year proxies may be better indicators.
Average total return performance of focused sustainable long-term fund investment categories to January 31, 2025
Fund Investment Category
# Funds/Share Classes
Average of Expense Ratios (%)
Net Assets ($MM)
Average 1-M Return (%)
Average 12-M Return (%)
Health
5
1.44
1,366.3
7.48
2.08
Trading–Leveraged Equity
1
0.98
5.2
7.01
-8.29
Mid-Cap Growth
18
0.97
5,363.7
6.17
16.51
Foreign Large Growth
13
1.01
1,961.7
5.32
7.40
Global Large-Stock Value
9
1.16
553.6
5.13
17.24
Foreign Large Value
7
1.18
180.7
5.11
13.29
Foreign Large Blend
80
0.80
28,816.2
4.46
9.81
Commodities Focused
7
0.71
359.9
4.17
4.23
Large Value
34
0.65
9,742.6
4.11
17.21
Technology
9
1.18
141.1
3.74
5.87
Mid-Cap Blend
30
0.90
7,580.8
3.73
17.88
Small Value
1
0.34
492.4
3.65
17.28
Global Large-Stock Growth
58
1.04
3,838.4
3.53
13.85
Target-Date 2060
20
0.70
88.1
3.51
17.67
Target-Date 2055
20
0.70
166.1
3.45
17.43
Target-Date 2065+
31
0.65
16.8
3.42
18.01
Small Blend
21
0.99
8,631.7
3.38
15.54
Emerging-Markets Local-Currency Bond
5
1.19
12.4
3.37
0.30
Target-Date 2050
20
0.70
252.9
3.35
17.04
Target-Date 2045
20
0.70
315.2
3.24
16.54
Aggressive Allocation
4
1.00
346.2
3.18
16.62
Global Large-Stock Blend
60
0.79
15,623
3.08
15.13
Target-Date 2040
20
0.70
391.1
2.99
15.27
Large Blend
171
0.76
152,845
2.95
21.99
Mid-Cap Value
2
0.23
372.7
2.80
13.43
Small Growth
6
1.15
359.9
2.79
11.39
Commodities Broad Basket
1
0.34
2.3
2.76
-1.27
Global Small/Mid Stock
41
1.11
1,856.1
2.75
7.99
Moderately Aggressive Allocation
4
0.73
886.4
2.74
13.49
Target-Date 2035
20
0.69
362.5
2.59
13.14
Large Growth
62
0.83
33,152.8
2.56
21.72
Industrials
5
0.58
888.3
2.20
12.29
Target-Date 2030
20
0.68
386.1
2.11
10.71
Real Estate
2
0.55
19.1
2.11
15.54
Global Allocation
4
0.76
139.6
2.10
9.78
Foreign Small/Mid Growth
4
1.38
331.9
2.07
4.16
Target-Date 2020
9
0.59
6.9
1.98
9.00
Moderate Allocation
53
0.99
9113.5
1.98
12.75
Target-Date 2025
17
0.74
373.2
1.88
9.14
Global Real Estate
3
0.38
438.3
1.83
6.76
Target-Date 2015
9
0.58
5.6
1.69
7.76
Diversified Emerging Mkts
53
1.03
8,616
1.62
12.68
Derivative Income
2
0.61
6.1
1.59
19.87
Natural Resources
22
0.99
6171.3
1.58
9.31
Moderately Conservative Allocation
7
0.78
273.7
1.57
8.02
Target-Date 2000-2010
8
0.58
1.1
1.39
6.31
Target-Date Retirement
19
0.67
221
1.34
6.80
High Yield Bond
30
0.77
3080.2
1.28
8.26
Multisector Bond
6
1.29
320
1.09
5.70
Nontraditional Bond
7
0.85
660.3
0.78
7.20
Bank Loan
9
1.52
2,645.2
0.77
8.12
Intermediate Core-Plus Bond
61
0.73
7634
0.73
2.93
Corporate Bond
15
0.72
3,221.1
0.68
3.68
Global Bond
6
0.71
169.2
0.63
4.48
Intermediate Core Bond
49
0.56
21,275.9
0.55
2.26
Short-Term Bond
22
0.67
4,134.5
0.54
4.78
Muni National Interm
25
0.67
1,201.5
0.44
2.22
Intermediate Government
10
1.06
1335
0.44
1.92
Ultrashort Bond
15
0.39
1,458.1
0.41
5.37
Miscellaneous Fixed Income
2
0.00
638.9
0.40
3.45
Muni National Short
1
0.20
18.8
0.34
3.49
Muni National Long
10
0.66
287.8
0.28
2.74
Global Bond-USD Hedged
17
0.53
1,665.1
0.27
3.77
Muni California Intermediate
3
0.65
199.7
0.22
1.87
Infrastructure
19
0.82
2,716.4
0.11
5.20
Utilities
2
0.81
42.7
0.05
6.98
Miscellaneous Sector
21
0.73
3,,579.8
-0.51
-7.41
China Region
1
0.79
44.2
-0.57
25.80
Equity Energy
5
0.62
183
-0.71
-4.62
Consumer Defensive
1
0.76
5.7
-2.29
7.46
India Equity
5
1.29
366
-4.14
4.89
Totals/Averages
1,379
0.81
359,958.6
2.42
11.91
Notes of Explanation: Investment categories listed in order of January 2025 performance from best to worst. Sources: Morningstar Direct and Sustainable Research and Analysis LLC
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