**Introduction** Sustainable investment funds and traditional funds increasingly overlap in portfolio construction and long-run return objectives, but they differ in mandate, disclosures, and constraints. Globally, sustainable funds have reached trillions of dollars in assets and are highly regionally concentrated, with Europe accounting for the dominant share. Sustainable funds, however, have weaker net inflows and slightly lower median returns than traditional funds, alongside ongoing concerns about classification consistency and greenwashing risk[1]. **What are sustainable investment funds?** Sustainable investment funds are investment funds that explicitly incorporate environmental, social, and governance (ESG) objectives or constraints into their investment process — commonly through ESG integration, screening (inclusion/exclusion), thematic strategies (e.g., climate transition), stewardship, and/or impact objectives — supported by sustainability-related disclosures[1]. **What are traditional funds?** Traditional funds are investment funds whose stated objective is primarily financial return (risk-adjusted performance) without an explicit sustainability objective or ESG mandate as a defining feature, even though they may consider financially material risks (including climate or governance risks) as part of general risk management[1]. **Differences between sustainable investment funds and traditional funds** **1.** **Scale and geographic concentration differ sharply** The global sustainable fund market reached nearly US$3.2 trillion in assets in 2024. Europe held US$2.7 trillion (84% of global sustainable fund assets), the United States held US$344 billion (11%), and the rest of the world accounted for about 5%[1]. This contrasts with the broader global fund market, where assets are more evenly distributed across regions, while sustainable fund assets remain heavily concentrated in Europe under region-specific regulatory and disclosure frameworks[1]. **2.** **2024 flows and median returns show a modest gap versus traditional funds** In 2024, global net inflows to sustainable funds fell to US$37 billion, while inflows to the total global fund market rose to US$1.4 trillion[1]. This indicates that relative to the broader fund market, sustainable funds captured a small portion of incremental allocations in 2024[1]. On reported performance, sustainable funds posted median returns of 0.8% in 2024, compared with 1.5% for traditional funds[1]. Over this short horizon, sustainable fund performance lagged traditional peers, a pattern consistent with differences in sector composition and factor exposure rather than structural underperformance[1]. **3.** **Labeling, disclosure, and supervision** Cross-market comparison is complicated by differences in disclosure regimes and the absence of harmonized definitions. As a result, a major global sustainable investment review discontinued publication of a single aggregated estimate of global sustainable investment, citing divergent methodologies, and instead relies on fund-level disclosure data[2]. Regulatory and supervisory activity has increasingly focused on fund labeling, disclosure quality, and controls against greenwashing, reflecting concerns that sustainability-related claims are not always supported by consistent underlying data and standards[3]. Sustainability-linked capital allocation increasingly intersects with competitiveness, standards-setting, and cross-border policy coordination, making consistency in sustainability-related disclosure and governance relevant for cross-market comparability and capital allocation across jurisdictions[4]. **Conclusion** At the global level, sustainable investment funds are distinguished from traditional funds mainly by their stated mandates and disclosure obligations, rather than by fundamentally different investment mechanics. Sustainable funds remain regionally concentrated, attracted weaker net inflows than the overall fund market in 2024, and reported marginally lower median returns than traditional funds. Differences between the two categories are thus most evident in governance, disclosure, and supervisory treatment rather than in systematic performance outcomes.
