Finding Sustainable Companies Beyond Today’s AI Leaders

Key Highlights

» The Fund’s exposure to mega-cap technology stocks helped the portfolio outperform.

» We recently added Archer Daniels Midland due to the stock’s positive momentum. Marriott International was sold, primarily based on our sustainability analysis.

» We believe the benefits of AI will extend to a broader range of businesses that can use the technology to automate processes, reduce costs, and improve overall efficiency. These efficiency gains may also support stronger sustainability outcomes.

Would you please summarize the equity market environment in the second quarter?

Mega-cap technology stocks rallied sharply during the second quarter, with semiconductor companies among the strongest performers. The strength of these stocks contributed to a market environment that continued to favor the largest companies and those benefiting from continued investor enthusiasm surrounding artificial intelligence and related infrastructure spending.

We’re pleased the Hennessy Sustainable ETF benefited from its exposure to this area, including positions in Intel, a semiconductor manufacturer that designs and produces computer processors and other chips, and Applied Materials, which provides equipment, services, and software used to manufacture semiconductors. Both rallied during the quarter, which helped the Fund outperform the S&P 500® Equal Weight Index in the second 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.

What company was recently added to the portfolio; what position was removed?

We recently added Archer Daniels Midland, a global agricultural supply chain and foodprocessing company. The primary driver behind the purchase was the stock’s positive momentum.

In the quarter, we sold Marriott International, a global hotel company that operates and franchises lodging properties, primarily based on our sustainability analysis. We quantitatively score companies on up to 25 material risk factors as part of our portfolio construction process. During this cycle, Marriott ranked just outside the top 50% of its peer group. This does not suggest that Marriott is a poor performer on these measures, but rather that it scored slightly below other companies in its peer group.

What trends or developments do you believe investors are overlooking today that could become important drivers of returns over the next several years?

We expect the benefits of artificial intelligence (AI) to extend beyond AI-focused companies. As U.S. businesses identify practical uses for AI, the technology could help automate processes, reduce development costs, and improve overall operating efficiency. For example, companies can use large language models to write traditional software code that may be less expensive to run, helping them achieve better unit economics.

These efficiency gains may also support stronger sustainability outcomes. Companies could use AI to reduce energy and resource consumption, minimize waste, improve workplace safety, and manage supply chains more effectively. In our view, companies that successfully translate AI into measurable improvements in productivity, resource efficiency, and financial performance may be well positioned over the next several years.