Sustainable Investing in a Volatile Market

Key Highlights

» The ETF outperformed the overall market in the first quarter due to the portfolio’s strong diversification, its lack of mega-cap exposure, and its risk optimization strategy.

» Holding Dow Inc delivered strong gains, and we exited after upside potential was largely realized.

» As a more balanced representation of individual stock performance and a better proxy for active stock selection, the S&P 500 Equal Weight Index was added as a benchmark to the ETF.

» Current dynamics in the market reinforce the opportunity set across energy transition and sustainable agriculture holdings.

Would you please discuss the equity market’s volatile quarter, and how the Fund performed?

Market volatility in the first quarter of 2026 unfolded in two distinct phases. The first phase saw a rotation away from AI-driven and mega-cap companies, a shift we had anticipated. However, the onset of geopolitical conflict reversed that trend, as investors sought the relative safety of large-cap companies.

While the S&P 500^® Index declined 4.33% and the S&P 500^® Equal Weight Index returned 0.75%, the Hennessy Sustainable ETF rose 2.48% due to the portfolio’s strong diversification, its lack of mega-cap exposure, and its risk optimization strategy. Security selection was strong, as 60% of the ETF’s holdings outperformed in the quarter.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Current performance may be lower or higher than the performance quoted.

Would you highlight a notable new holding in the portfolio during 1Q26?

Dow Inc, a leading global materials science company, was added at the beginning of the year. Although its short-term earnings and revenue expectations were underwhelming, its longer-term positioning looked promising. We were pleased the stock increased 59% during the quarter. Given the strong performance, we believe the investment largely realized its upside potential and, as a result, we exited the position to realize the gains.

The S&P 500 Equal Weight Index was added as a benchmark to the ETF. How does it better reflect the ETF’s investment approach?

The S&P 500 has become increasingly concentrated, with roughly 37% of the index represented by its 10 largest constituents as of March 31, 2026, marking the highest level of concentration in modern history. In contrast, the S&P 500 Equal Weight Index provides a more balanced representation of individual stock performance and serves as a better proxy for active stock selection. As a result, the Equal Weight Index was added as an additional benchmark to better reflect portfolio positioning.

Looking ahead, what catalysts could drive momentum in sustainable investing strategies, and how is the ETF positioned to benefit?

With the ongoing conflict in the Middle East, elevated oil prices would likely serve as a meaningful tailwind for renewable energy, improving the relative economics of clean power and accelerating adoption across end markets. At the same time, ongoing supply chain constraints could benefit biogenic and locally sourced fertilizers, as agricultural producers seek more reliable and sustainable inputs. Within the context of the ETF, these dynamics reinforce the opportunity set across energy transition and sustainable agriculture holdings.