
Lee Clements

Henry Morrison-Jones, CFA
- Sustainable indices rebounded in Q4, led by climate-focused equities and green bonds, while ESG-focused indices underperformed.
- Tesla’s 54% surge boosted SI indices with high green revenue exposure but hurt ESG indices due to its weak ESG score.
- Green bond indices outperformed, benefiting from shorter duration & financial sector weightings, while alternatives struggled with rising bond yields.
During the fourth quarter, many sustainable investment (SI) indices saw a rebound in their performance relative to market capitalisation-weighted benchmarks, ending a year in which the SI market had to navigate strong macro-economic and geopolitical crosscurrents.
Q4 relative performance & 12m relative performance
Climate-focused sustainable equity indices and green bond indices had a surprisingly strong Q4. Four of the six global sustainable equity indices tracked in the FTSE Russell Sustainable Investment Insights Report[1] were ahead of the market in Q4. By comparison, in Q3 all of the indices lagged their cap-weighted reference benchmarks.
Relative performance of select global sustainable indices
Source: LSEG FTSE Russell. Data as of December 31, 2024. USD total return, fixed income indices USD hedged. Past Performance is no guarantee of future results
A tale of two Teslas
The FTSE All-World Paris-Aligned index (PAB) and the FTSE Environmental Opportunities All Share index (EnvOps) had a particularly strong Q4, driven by their significant overweight position in Tesla shares (in turn, a result of the company’s relatively high green revenues). The Tesla share price rose 54 percent during the quarter.
However, environment-, social- and governance-focused (ESG-focused) sustainable equity indices, such as the FTSE4Good All-World index (4Good) or the FTSE Developed ESG Low Carbon Target Exposure index (LowCarb), underperformed market-cap benchmarks. This reflected these two Sustainable indices’ underweight positions in Tesla, which has a weak ESG score.
Green bonds benefited in Q4, longer-duration indices lagged
Green bond indices also performed well in Q4, particularly the FTSE WBIG Corporate Green Impact Bond (Green Corp). This reflected the index’s relatively shorter duration, lower US weighting and higher weighting in banks.
Other sustainable fixed income indices had a mixed quarter, typically generating returns close to their parent benchmarks, where rising bond yields caused negative performance across the corporate and sovereign bond markets.
With yields rising, active duration was the main driver of relative performance: the FTSE WBIG Corporate ex Fossil Fuels Enhanced index (FFE Corp) and the FTSE WBIG Corporate Choice index (Choice Corp), both of which have slightly shorter duration than the broader corporate bond market, outperformed; meanwhile, the longer-duration FTSE WBIG PAB Corporate bond index (PAB Corp) underperformed its reference benchmark.
Several SI sovereign bond market indices were also impacted by their longer duration relative to parent indices, although an underweight position in US bonds in the FTSE Climate Risk Adjusted WGBI index series (Climate WGBI) acted as a tailwind, reducing underperformance.
Weaker performance for alternatives
The sustainable alternatives indices also suffered from rising bond yields in Q4, reversing the strong performance seen in Q3. Our sustainable real estate index, the FTSE EPRA Nareit Developed Green Low Carbon Target index (EPRA Nareit Green), slightly underperformed the market in Q4 due to negative stock selection in the real estate holdings and development sub-sector. However, over the whole of 2024 it performed better in relative terms than in previous years. Meanwhile, in the SI infrastructure index sector, the FTSE Global Core Infrastructure TPI Climate Transition index (Green Infra) underperformed due to weakness in railroads stocks.
2024 risk/return comparisons show a mixed picture
To put the performance of sustainable multi-asset indices into context, it’s also helpful to compare their risk (volatility) and return with those of the broader market over the course of the year.
1 year risk/return comparison of select global & developed SI equity, bond and alternative indices
Source: LSEG FTSE Russell. Data as of December 31, 2024. USD total return, fixed income indices USD hedged. Past Performance is no guarantee of future results
This risk/return comparison highlights the strength of the FTSE All-World Paris-Aligned index (PAB) and the FTSE WBIG Corporate Green Impact Bond index (Green Corp) relative to their parent indices in 2024. Other sustainable equity indices (such as the FTSE4Good All-World, FTSE All-World TPI Climate Transition ex Fossil Fuels and FTSE Global All Cap Choice) and SI corporate bond indices showed similar risk/return characteristics to those of the market overall.
In summary, far from being a disaster for sustainable investment, 2024 saw solid but mixed investment performance.
1. Sustainable Investment Insights - January 2025 | LSEG
Choice = FTSE Global All Cap Choice; TPI = FTSE All-World TPI Climate Transition ex Fossil Fuels; 4Good = FTSE4Good All-World; PAB = FTSE All-World Paris-Aligned (PAB); Env Ops = FTSE Environmental Opportunities All-Share; LowCarb = FTSE Developed ESG Low Carbon Target Exposure; All World = FTSE All-World; Climate WGBI = FTSE Climate Risk Adjusted World Government Bond Index; Adv Climate WGBI = FTSE Advanced Climate Risk Adjusted World Government Bond Index; ESG WGBI = FTSE ESG World Government Bond Index; WGBI = FTSE World Government Bond Index; Choice Corp = FTSE Corporate WBIG Choice Bond Index; FFE Corp = FTSE WBIG Corporate ex Fossil Fuels Enhanced Bond Index; PAB Corp = FTSE WBIG PAB Corporate Bond Index; GreenWBIG = FTSE World Broad Investment-Grade (“WBIG”) Green Impact Bond Index; Green Corp = FTSE WBIG Corporate Green Impact Bond Index; Green Sov = FTSE WBIG Domestic Sovereign Green Impact Bond Index; WBIG = FTSE World Broad Investment-Grade; WBIG Corp = FTSE World Broad Investment-Grade Corporate; EPRA Nareit Green = FTSE EPRA Nareit Developed Green Low Carbon Target; EPRA Nareit Dev = FTSE EPRA Nareit Developed; Green Infra = FTSE Global Core Infrastructure TPI Climate Transition; Global Infra = FTSE Global Core Infrastructure
Read more about
Disclaimer
© 2025 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”). LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) FTSE (Beijing) Consulting Limited (“WOFE”) (7) Refinitiv Benchmark Services (UK) Limited (“RBSL”), (8) Refinitiv Limited (“RL”) and (9) Beyond Ratings S.A.S. (“BR”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL, and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “Refinitiv” , “Beyond Ratings®”, “WMR™” , “FR™” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of LSEG or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator. Refinitiv Benchmark Services (UK) Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by LSEG, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical inaccuracy as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or LSEG Products, or of results to be obtained from the use of LSEG products, including but not limited to indices, rates, data and analytics, or the fitness or suitability of the LSEG products for any particular purpose to which they might be put. The user of the information assumes the entire risk of any use it may make or permit to be made of the information.
No responsibility or liability can be accepted by any member of LSEG nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any inaccuracy (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of LSEG is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of LSEG nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indices and rates cannot be invested in directly. Inclusion of an asset in an index or rate is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index or rate containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index and/or rate returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index or rate inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index or rate was officially launched. However, back-tested data may reflect the application of the index or rate methodology with the benefit of hindsight, and the historic calculations of an index or rate may change from month to month based on revisions to the underlying economic data used in the calculation of the index or rate.
This document may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of LSEG nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of LSEG. Use and distribution of LSEG data requires a licence from LSEG and/or its licensors.