Sustainable investing has been under pressure for some time, not least due to the policies of U.S. President Donald Trump. This shift in sentiment has also hit ecology funds hard.
But Trump is not the only factor. Funds that invest in companies active in environmentally related markets have faced disappointing performance for several years. The average annual return for funds in the Morningstar Equity Sector Ecology category was just 7.31 percent over the past five years, compared to a 12.22 percent return for the global equity index Morningstar Global TME. As a result, investor interest in such funds has cooled considerably. In 2023, nearly 5 billion euros were withdrawn from these funds, with that outflow accelerating to 14 billion euros in 2024. In the first three months of 2025 alone, outflows have already reached 3 billion euros.
Nevertheless, ecology funds remain particularly well suited for investors seeking to invest in companies that contribute to and benefit from a transition toward a more sustainable economy. We discuss two such funds that are covered by Morningstar analysts: Impax Environmental Markets, which holds a Morningstar Medalist Rating of Silver, and Pictet-Global Environmental Opportunities, which carries a Bronze rating.
People
Both Impax Environmental Markets and Pictet-Global Environmental Opportunities are managed by experienced professionals, but they differ notably in the structure and scale of their support teams. Impax is managed by a trio consisting of Bruce Jenkyn-Jones, Jon Forster, and Fotis Chatzimichalakis. Jenkyn-Jones, who also serves as CIO, brings more than 30 years of relevant experience in the ecological investment space. Although he plans to retire on June 30, 2026, Forster in particular provides continuity and expertise that will remain in place beyond that date. The team is supported by an exceptionally stable and extensive group of more than 40 managers and analysts, all operating within a strong investment culture. As a result, the Impax fund earns a High rating on the People Pillar.
Pictet’s team, by contrast, has experienced some turnover recently. Nonetheless, seasoned lead manager Luciano Diana provides continuity. He runs the fund with a small team that includes Katie Self, who joined in October 2022, and, since early 2025, Chris Elias and Nadine Hayderi. These three team members can be seen as replacements for managers who gradually left in recent years, including Gabriel Micheli, who co-founded the strategy with Diana but shifted his focus to a new strategy in 2022. Despite these changes, the team remains compact yet well-equipped, meriting an Above Average People Pillar rating.
Process
Due to their focus on environmentally related markets, both funds avoid large portions of the global equity universe, which can limit their ability to generate long-term alpha versus the Morningstar Global TME Index category benchmark. Although both funds follow a structured and disciplined process, this constraint results in an Average rating for the Process Pillar.
Impax employs a deliberate approach that begins with rigorous and effective screening based on environmental, financial quality, and valuation criteria. The top ideas then go through a detailed ten-step process in which the team evaluates management, competitive advantage, business model and strategy, and ESG factors, among others. The process concludes with a thorough valuation assessment that incorporates multiple methods and scenarios.
Pictet’s team uses a disciplined approach that is applied across all of the firm’s thematic funds. The investment universe is defined through a distinctive framework based on the “planetary boundaries” system. Stocks are then analyzed based on criteria such as purity of theme exposure, liquidity, and volatility. The highest-scoring ideas undergo a deeper analysis focused on business franchise, management quality, and financial attractiveness.
Portfolio
The ecological approach of the two funds is clearly reflected in the sector allocations of their portfolios, which differ significantly from the Morningstar Global TME category benchmark. The industrials sector dominates both portfolios, with allocations of around 45 percent compared to just 10 percent in the index. By contrast, there is little to no exposure to sectors such as communication services, energy, financials, and real estate, which together account for roughly one-quarter of the benchmark.
Both funds invest significantly less in giantcaps than the index. The Pictet fund primarily targets companies in the large- and midcap segments, while Impax focuses more on mid- and smallcap companies. Because of its emphasis on smaller firms, the Impax fund’s portfolio is also slightly more diversified, holding around 55 positions, compared to just over 40 for the Pictet fund.
Performance
Over the long term, both Impax Environmental Markets and Pictet-Global Environmental Opportunities have historically delivered returns that could compete with those of the category benchmark. Their performance was particularly strong during the Covid-19 pandemic. However, since the end of 2021, both funds have experienced significant annual underperformance.
This underperformance was partly due to a broader shift in sentiment toward sustainable investing, but it was largely driven by the characteristic features of ecology fund portfolios. For example, the lack of exposure to the “Magnificent Seven” stocks had a notably negative impact through the end of April, while in 2024, the absence of investments in the financial services sector also hurt performance.
Finally, the tilt toward smaller companies has been a considerable headwind for both funds—especially for Impax, given its stronger focus on smallcaps.
Ronald van Genderen is a Senior Manager Research Analyst at Morningstar. Morningstar conducts quantitative and qualitative analysis of investment funds and is part of the expert panel of Investment Officer.