Global Sustainable Funds Are Up Nearly 11% This Year

Global large-cap sustainable funds are up 10.9% so far this year, lagging the 14.8% return for the MSCI ACWI Large Cap Net Return Index, and 12.8% return for the Morningstar Global Markets Index (net return), based on a screen of 1,402 funds. The best-performing funds in the category posted much higher returns, driven by holdings like Nvidia NVDA and Constellation Energy CEG.

To find this average, I took all funds under the global large-cap Morningstar Category listed as sustainable investments. The 10.9% represents the average return of the 1,402 funds within this screen. If you exclude funds domiciled in the US, the average return of the 1,317 funds is 11.1%

We also looked at the best-performing global large-cap sustainable funds and the largest global large-cap sustainable funds, detailed later in this article.

What Is Sustainable Investing?

Sustainable funds are funds that use environmental, social, and corporate governance criteria to evaluate investments or assess their societal impact. They may pursue a sustainability-related theme or explicitly aim to create measurable social impact. (For more on the range of approaches encompassed by the term “sustainable investing,” read The Morningstar Sustainable-Investing Framework.)

The idea is that integrating ESG into an investment process can add valuable information that might otherwise be overlooked in traditional financial analysis and thereby may be able to help reduce risk or generate excess returns.

Morningstar defines a strategy as a “sustainable investment” if it is described as focusing on sustainability, impact, or ESG factors in its prospectus or other regulatory filings.

For this piece, I ran a screen of all global large-cap funds, excluding US-domiciled funds, listed as a sustainable investment. Our search yielded 1,317 funds from across all markets and domiciles. From there, I compiled the five with the greatest assets under management and the five best-performing funds available to investors. For comparison purposes in the table below, I include the Morningstar Global Markets Index’s net returns as well as the average return of the funds.

Largest Sustainable Funds

Largest Sustainable Large-Cap Funds Excluding US-Domiciled Funds

• Nordea 2—Global Responsible Enhanced Equity Fund
• Northern Trust World Custom ESG Equity Index Fund
• Handelsbanken Global Index Criteria
• BlackRock ACS World ESG Equity Tracker Fund
• BlackRock ACS World ESG Insights Equity Fund

Nordea 2—Global Responsible Enhanced Equity Fund

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Above Average

The largest fund on our list is the $17.46 billion Nordea 2—Global Responsible Enhanced Equity Fund, which falls under the global large-cap blend category. For the year to date, the Nordea fund is up 14.39%. The fund was launched in November 2021.

The fund looks for stocks that have moved away from their intrinsic values, with a high ESG investment profile and a low carbon footprint. Companies and issuers are excluded from the fund’s investment universe if they are involved in certain activities that are deemed to be harmful to the environment or to society.

As of Aug. 16, the fund has 311 holdings, with the four largest positions being some of the “Magnificent Seven” companies: Nvidia, Apple AAPL, Microsoft MSFT, and Google GOOG, respectively.

Northern Trust World Custom ESG Equity Index Fund

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Average

The $15.2 billion Northern Trust World Custom ESG Equity Index Fund is the next largest fund on our list. This fund is in the global large-cap blend Morningstar Category. For the year to date, the Nordea fund is up 14.91%. The fund was launched in November 2021. The fund has outperformed both benchmarks in one-year and year-to-date returns.

The passive fund tracks the MSCI World Custom ESG Index. It has 1,491 holdings. The largest holdings are Apple, at 5.01% of assets, and Microsoft, at 4.55%.

Handelsbanken Global Index Criteria

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Average

Handelsbanken Global Index Criteria is the third largest fund in our list, with just over $12 billion in assets. This fund is in our global large-cap blend category. For the year to date, the Nordea fund is up 19.80%. The fund was launched in December 2018, and it has outperformed in one-year and year-to-date returns.

The passive fund tracks the Solactive ISS ESG Screened Global Markets Index, which aims to reflect the performance of the global equity markets, excluding those companies that do not meet the sustainability requirements of the index.

The fund has 1,975 holdings, with the fund’s largest holdings being Apple, at 5.08% of assets, and Microsoft, at 4.83%.

BlackRock ACS World ESG Equity Tracker Fund

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Average

BlackRock ACS World ESG Equity Tracker Fund has $11.79 billion in assets. The fund is up 12.8% for the year to date and 21.30% over the past 12 months. The fund was launched in December 2018. The fund lagged the Morningstar Global Markets Index for the year to date but outperformed it over the past year.

The passive fund tracks the MSCI World ESG Focus Low Carbon Screened Index, seeking to maximize exposure to positive ESG factors while minimizing carbon exposure.

The fund has 504 holdings. Its largest holding is Apple, at 4.65% of assets, followed by Nvidia, at 4.40%.

BlackRock ACS World ESG Insights Equity Fund

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Average

BlackRock ACS World ESG Insights Equity Fund has $11.47 billion in assets. The fund is up 12.49% for the year to date and 17.65% in the last year. The fund has outperformed the Morningstar Global Markets Index over the last year but underperformed it over the year to date.

The fund is actively managed. It aims to own companies within the FTSE Developed World Index that maximize the opportunities and minimize the potential risks associated with ESG themes, using a combination of ESG exclusionary screens and BlackRock’s Sustainable Investing Material BlackRock Analysis methodology.

The fund has 645 holdings. Its largest holding is Microsoft, at 5.41% of assets, followed by Nvidia, at 4.59%.

Best Performing Sustainable Funds

5 Best-Performing Sustainable Funds

• Munro Climate Change Leaders Fund (Managed Fund)
• CI Global Climate Leaders Fund CLML
• iShares MSCI World Momentum Factor ESG UCITS ETF
• BNP Paribas Easy—Low Carbon 300 World PAB
• RHB i-Global Sustainable Disruptors Fund

Munro Climate Change Leaders Fund ETF

• Morningstar Category: Australia Fund Equity World Large Blend
• Morningstar Sustainability Rating: Below Average

The best-performing fund in our list is the $40.5 million Munro Climate Change Leaders Fund, which falls into the Australia fund equity world large-blend category. It is up 37.86% for the year to date and 45.6% over the past year. The fund was launched in January 2022. Munro Partners manages an exchange-traded fund and a mutual fund of the same strategy; the ETF is shown here.

The fund is actively managed. According to the fund literature, it is a concentrated long-only portfolio of growth-oriented, climate-change-focused equities issued by companies located anywhere in the world.

The fund has just 21 holdings. The fund’s largest position is Nvidia, at 9.03% of assets. (Indeed, three out of the five top performers had Nvidia as their top holding.) The fund’s second-largest holding is Constellation Energy at 8.76% of assets.

CI Global Climate Leaders Fund

• Morningstar Category: Global Equity
• Morningstar Sustainability Rating: Below Average

The $59.7 million CI Global Climate Leaders Fund is in the global equity category. It is up 37.49% for the year to date and 46.16% over the past year. The fund was launched in July 2021. For the year to date, the fund has produced almost double the return of the Morningstar Global Markets NR Index.

The fund is actively managed with the objective of investing in a long-only portfolio of companies focused on decarbonization, and climate change, located anywhere in the world.

The fund has just 31 holdings. Constellation Energy accounts for 7.71% of assets, and Nvidia, 7.03%.

iShares MSCI World Momentum Factor ESG UCITS ETF

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: Above Average

The $258.1 million iShares MSCI World Momentum Factor ESG UCITS ETF, which falls into the global large-cap blend equity category, is up 23.06% for the year to date and 34.59% over the past year. The fund was launched in October 2021.

The fund is passively managed, tracking the MSCI World Momentum ESG Reduced Carbon Target Select Index.

It has 178 holdings. Nvidia is the largest position, at 7.08% of assets, and Eli Lilly LLY is the second largest, at 3.38%.

BNP Paribas Easy—Low Carbon 300 World PAB

• Morningstar Category: Global Large-Cap Blend Equity
• Morningstar Sustainability Rating: High

The $51.8 million BNP Paribas Easy—Low Carbon 300 World PAB fund falls into the global large-cap blend equity category. It is up 22.55% for the year to date and 34.05% over the past year. The fund was launched in June 2021.

The fund is passively managed, replicating the performance of the Euronext Low Carbon 300 World PAB (NTR) Index.

It has 299 holdings. Nvidia is the largest holding, at 11.92% of assets, and Spanish fashion retailer Inditex ITX accounts for 9.64%.

RHB i-Global Sustainable Disruptors Fund

• Morningstar Category: Malaysia Fund Equity—Global
• Morningstar Sustainability Rating: Above Average

The $42 million RHB i-Global Sustainable Disruptors Fund falls into the Malaysia fund equity—global category. It is up 21.84% for the year to date and 33.74% over the past year. The fund was launched in January 2021.

The actively managed fund invests up to 95% of assets in Shariah-compliant global equities and screens based on the issuer’s ESG score. The manager uses its own framework to derive the ESG scores.

The fund has 47 holdings The largest are Microsoft, at 8.33% of assets, and Nvidia, at 7.57%.