Sustainability Indexes in Focus: Where the AI Trade Left Each Index

The 12 months to June 30, 2026 amounted to an AI year, just not the one investors had grown used to. Capital rotated from the companies that build AI models to those that build the infrastructure those models run on: memory, foundries and equipment. No index's sustainability objective, whether exclusionary screening or managing sustainability-related risks, directly determined its position in that rotation. Each index still had implicit exposures within the sector, which determined which part of the AI trade it held.

We analyzed the performance of all five MSCI ACWI Sustainability Indexes June 30, 2025, through June 30, 2026. The MSCI ACWI Universal Index produced the highest active return — 1.65%, with a 1.14% tracking error (TE). The MSCI ACWI Focus Index delivered 0.94% excess return with 0.82% TE, the lowest TE. Its optimization approach helped it reach the second-highest ESG score of the five without deviating far from its parent, the MSCI ACWI Index.¹

The two indexes sat at opposite ends of performance despite using the same selection method applied at different depths. The MSCI ACWI SRI Index, which selects the top 25% of companies by sustainability score within each sector, outperformed by 1.20%. The MSCI ACWI Selection Index, which selects the top 50%, underperformed by 0.50%. Each index met its sustainability objective. Index-level ESG scores ranged from 6.87 to 8.27 across the five against 6.85 for the parent index.²

Data from June 30, 2025, to June 30, 2026. Returns in USD, gross. Carbon intensity measured as Scope 1+2+3 emissions relative to enterprise value including cash (EVIC).

Three layers of the AI value chain decided the period: chip design and equipment, the hardware that chips go into and the software running on top of both. Each sits in a different Global Industry Classification Standard (GICS®) industry group (semiconductors, technology hardware and software and services, respectively) and each moved differently: 104%, 80% and -24%. These indexes pick stocks within each sector, so sector weights stayed close to the parent.³

Every index was overweight semiconductors, and MSCI ACWI SRI held the largest position, accounting for a 9.68% gain. Technology hardware and software and services decided the ranking. MSCI ACWI Selection was underweight technology hardware and overweight software and services, leading to a loss of 3.68% and 1.38% respectively. MSCI ACWI Focus took almost none of these implicit industry exposures, given its low TE budget.

Data from June 30, 2025, to June 30, 2026. Returns in USD, gross. The chart shows the active exposure to the three best- and three worst-performing GICS industry groups in the MSCI ACWI Index over the period, selected by industry-group return, and the aggregate active performance from the securities from those industry groups.

The chart walks through each index's constituents from largest to smallest, showing where overweight and underweight positions added to or took away from performance. MSCI ACWI Selection's wider selection rule was enough to hold several of the year's largest gainers, including Alphabet Inc. and NVIDIA Corp., and both added to early performance. That edge narrowed further down the list, where underweights in other large and mid-sized names, Apple Inc. chief among them, gave most of it back.

Alphabet cleared the top 50% cut within its sector but not the top 25%, leaving MSCI ACWI SRI with an underweight that detracted early in the period.⁴ The index held larger overweights than MSCI ACWI Selection in Advanced Micro Devices, Inc., Intel Corp. and Applied Materials Inc., and those positions accounted for the recovery.

Data from June 30, 2025, to June 30, 2026. Returns in USD, gross.

How to use this chart: Click on the individual index name to see the returns over the time period. Hover over each dot in the chart to see the active weight and performance contribution of each security named.

The performance of the MSCI Sustainability Indexes reflected implicit industry exposures and stock-level positions that followed from the eligibility criteria rather than from any view on the market. In a narrow market, a small number of securities can account for most of a headline active return, so a modest active weight in one of them could become material. When a single theme sets market direction — as we have seen during the period — sustainability-focused investors should monitor their implicit industry exposures from their chosen methodology as that may impact short-term performance.