Pioneer Global Sustainable Equity Fund Q2 2024 Performance And Market Commentary

Average Annual Total Returns for Class Y Shares

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Market Review

During the second quarter, the MSCI All Countries World Index and the MSCI World Index returned 2.87% and 2.63%, respectively.

At a regional level, U.S. stocks returned 4.28%, Japan returned -4.27%, European stocks finished flat at 0.55% and Emerging Markets enjoyed strong returns at 5.00% (represented by the S&P 500, MSCI Japan, MSCI Europe and MSCI EM Indices, respectively).

Market sentiment during this period was influenced by various factors, resulting in significant divergences across different investment styles, market breadth and geographical regions. Investors were closely monitoring global economic data, as the future direction of interest rates and inflation remained uncertain. Additionally, increasing geopolitical risks had a negative impact on stocks across many economic regions.

In the U.S., there were surprises in both consumer and producer inflation indices, with inflation trending lower. However, concerns about the overall health of the economy began to emerge. Reduced growth and inflation expectations led to a decline in benchmark rates throughout the quarter, with the 10-year U.S. Treasury falling from a high of 4.70% in April to 4.36% by the end of June. Furthermore, the market saw a surge in enthusiasm for artificial intelligence, causing investors to overlook valuation concerns and favor select growth stocks, such as Nvidia (NVDA), which was the most highly valued stock, in terms of market capitalization, in the S&P 500 Index (SP500, SPX) for the quarter.”

This resulted in a narrow market breadth, with the market-weighted S&P outperforming the equal-weighted S&P by more than 6%.

European equity performance was lackluster, as business activity unexpectedly declined, as indicated by both the services and manufacturing PMI indicators. Additionally, volatility in European markets was driven by President Macron’s call for elections in response to European Union elections, which increased political uncertainty in the region.

In Japan, investor enthusiasm waned due to speculation about the direction of the Bank of Japan’s monetary policy normalization. Slowing economic data in the services sector, coupled with rising inflation and interest rates, further dampened demand for equities during the quarter.

The best-performing sector in the quarter was information technology, benefiting from the strong performance of growth stocks. On the other hand, materials and real estate were among the underperforming sectors.

Performance Review

During the quarter, Pioneer Global Sustainable Equity Fund Class Y shares returned -1.12%, underperforming the 2.63% return of the Funds primary benchmark – the MSCI World Index. Relative underperformance for the period was driven by both security selection and sector allocation decisions given the Portfolio’s underweight to information technology. For example, a lack of exposure to Nvidia, which significantly outperformed during the quarter, led to relative weakness. The decision to not hold some mega-cap growth stocks, such as Nvidia, has been based on valuation concerns rather than the fundamentals of the stocks. Instead, the Portfolio holds companies that are believed to have the potential to outperform over the full market cycle, align with the quality and valuation criteria of the investment process, and can also benefit from the rapid growth in market trends including artificial intelligence and more efficient data storage.

Another detractor included exposure to HENSOLDT (OTCPK:HAGHY), a German company that develops sensor technologies and other security electronics for the defense and aerospace sectors. During the quarter, the shares took a breath after three strong months of outperformance driven by continued optimism for higher defense spending in Europe. We continue to hold the stock given the company’s massive order backlog and large business pipeline due to increased German defense spending, which we believe could fuel significant growth for the company in the medium- to long-term. We also find the valuation attractive, given this anticipated long-term growth.

In terms of contributors to performance, security selection in the consumer discretionary and communication services sectors was positive. For example, Internet media giant Alphabet (GOOG,GOOGL) continues to be a strong contributor to the Portfolio. Alphabet has been leveraging its global search leadership position into an expanding AI capability for years, and in our view, is one of the most well rounded AI players. Investor interest in this technology continue to support the stock which was also boosted in the month by an exceptionally strong revenue and earnings report for the first quarter, coupled with the announcement of an additional share buyback. Given the company’s strength in Internet advertising, attractive valuation, and momentum in other areas of its business, including the cloud, we continue to maintain a sizable position of the stock.

Performance Review

Pure Storge (PSTG) is a leading provider of software-defined, all-flash-array storage solutions, and was another top contributor to performance in the period. During the quarter, the company delivered a Q1 FY25 beat for revenue and operating profit boosting returns during the period. We continue to hold the stock as we view them as one of the most innovative enterprise storage vendors and a winner in AI-driven data center growth. The outlook for 2024 shows a possible return to higher growth rates and Pure Storage is in the very early stages of what we believe will be meaningful sales to cloud service providers as a replacement for bulk Hard Disk Drive (potentially a $6-9 bn opportunity). Furthermore, Pure Storage remains very attractively valued, compared to a group of similarly high value-add, high-growth technology companies.

Top Relative Detractors and Contributors – Second Quarter 2024

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Top 10 Holdings (as of June 30, 2024)

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Market Outlook and Positioning

From an economic perspective, we believe the global economy is currently in a better position compared to the consensus view from a year ago. In the U.S., there has been no recession, and in Europe, economic numbers have been quite strong after a period of weaker performance. In Asia and China, signs of a rebound have been more evident, and the outlook appears more favorable than it did a year ago. However, there has been a noticeable slowdown in economic data more recently, with a decline in inflation and GDP growth. In the U.S., the private sector of the economy is slowing down, and the consumer, who is a key driver of the U.S. economy, has been gradually weakening. For example, retail sales are indicating lower annualized growth in the economy.

Additionally, the inverted yield curve between the 10-year Treasury and the 3-Month T-bill suggests that the market still perceives a risk of further economic slowdown. Overall, while there have been positive developments in the global economy, recent indicators point to a slowdown and potential risks ahead.

Market volatility and divergences in equity performance have increased as expectations for interest rate cuts later in the year have consolidated across the world. Typical of late-cycle conditions, equity performance has shifted towards U.S. stocks, particularly those in less cyclical sectors. However, in our view, this may not be the appropriate reaction given the current valuations in the U.S. market. The valuation of the market is a fact, not a forecast, and the U.S. market is currently very expensive relative to its historical levels. Typically, when CPI and interest rates are at these levels, the market has traded at a Price to Earnings Ratio (P/E) of approximately 17x earnings. However, the current P/E of the S&P 500 is at historically high levels of more than 24x. This does not necessarily mean that the market cannot continue to rise, but it suggests that valuations have largely been driven by multiple expansion rather than earnings.

We continue to pursue opportunities in high quality stocks that are attractively priced, and that we believe can perform across the market cycle. Overall, we seek to minimize risks from macro factors by identifying idiosyncratic risks. There were no material shifts in the Portfolio’s sector or geographic positioning during the quarter as we remain focused on our “all weather” process that seeks to invest in quality stocks with attractive valuations. Buy and sell decisions that occurred during the period were largely focused on rebalancing towards ideas within the same sector, but with a more favorable risk/reward profile. For example, within materials we shifted the Portfolio allocation. Similar shifts occurred across other sectors including financials.

In Europe, despite weaker economic output, we have invested in an array of companies that we believe have attractive valuations relative to their earnings power. This includes a higher weight to over-capitalized banks that focus on traditional banking services and reduced exposures to banks with credit concerns. Despite recent weakness in this sector, our view is these events do not represent a permanent impairment of capital, but instead represents a period of market noise that will normalize. Many of these companies are global leaders in their fields, and simply have lower valuation than their global peers because their headquarters and listing happen to be in Europe. We are happy to take advantage of the mis-pricing of these companies, given their potential ability to generate strong returns for investors, even as we maintain a less cyclical overall exposure to economic activity in Europe.

In Japan, we remain overweight relative to the benchmark by investing in companies that we believe can benefit from the weaker Yen and an improved competitive position to export across the globe. With the weak Yen, producing in Japan has become much more competitive. We continue to look for opportunities in the nascent re-industrialization that is resulting from this newfound competitiveness, and in companies that are implementing reforms to boost returns and enhance shareholder returns.

Given the richer valuations in U.S. mega-cap growth stocks and their concentration in major U.S. indices, the Portfolio remains underweight this segment of the market. Therefore, the largest sector underweight within the Portfolio is in the information technology sector. From a geographic positioning viewpoint, this has also resulted in an underweight relative to the Portfolio’s benchmark to the U.S. On that note, the Portfolio maintains an investment theme of “less cyclicality”, which is due to worries about where we are in the economic cycle. Given the positioning in banks, energy, and Japanese manufacturing, we have intentionally limited cyclicality in the remainder of the portfolio. This shows up more on a stock-by-stock analysis than in the overall sector weightings. Thus, we are underweight industrials, but more to the point the industrials we own tend to not have traditional cyclical exposure. Similarly, while we are overweight materials (a sector considered highly cyclical), our holdings tend to be far less cyclical than the sector. Finally, the same case can be made for our holdings in consumer discretionary (where we are moderately overweight) – the stocks we own tend to have less of a traditionally “discretionary” exposure than the sector.

Performance Attribution: Additional Information This performance attribution seeks to identify and quantify the drivers of portfolio performance relative to that of its benchmark. Using FactSet software, we create hypothetical subportfolios by segmenting the portfolio and its benchmark, then measure the value (weight) and returns of those hypothetical subportfolios. This lets us measure the performance impact of a decision to overweight or underweight a portfolio segment. It also lets us measure the performance impact of a specific security selection within each segment. The Morgan Stanley Capital International (MSCI) World NR Index is an unmanaged measure of the performance of stock markets in the developed world. The MSCI All Country World NR Index is an unmanaged, free-float-adjusted, market-capitalization-weighted index that is designed to measure the equity market performance of developed and emerging markets. The Index consists of 45 country indices comprising 24 developed and 21 emerging market country indices. The MSCI Japan NR Index measure the performance of the large and mid-cap segments of Japan’s market. The MSCI Europe Index captures large and mid-cap representation across 15 Developed Markets (DM) countries in Europe (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.). The MSCI Emerging Markets (EM) Free Index is a free float‐ adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The S&P 500 Index measures the performance of the broad US stock market. Indices are unmanaged and their returns assume reinvestment of dividends and do not reflect any fees or expenses. It is not possible to invest directly in an index. Glossary of Frequently Used Terms Alpha– measures risk-adjusted performance, representing excess return relative to the return of the benchmark. A positive alpha suggests riskadjusted value added by the manager versus the index. Beta – measures an investment’s sensitivity to market movements in relation to an index. A beta of 1 indicates that the security’s price has moved with the market. A beta of less than 1 means that the security has been less volatile than the market. A beta of greater than 1 indicates that the security’s price has been more volatile than the market. Basis Point– A unit of measure used to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields. Correlation– The degree to which assets or asset class prices have moved in relation to one another. Correlation ranges from -1 (always moving in opposite directions) through 0 (absolutely independent) to 1 (always moving together). Cost of Capital — Represents a calculation of the minimum return a company would need to justify a capital– budgeting project, such as building a new factory. Credit Spreads (or Spreads) – The differences in yield between two fixed-income securities with similar maturities. Dividend yield– refers to a stock’s annual dividend payments to shareholders, expressed as a percentage of the stock’s current price. Earnings Per Share (EPS) – The portion of a company’s profit allocated to each outstanding share of common stock. Price to Earnings (P/E) Ratio– The price of a stock divided by its earnings per share. Standard Deviation– A statistical measure of the historic volatility of a portfolio; a lower standard deviation indicates historically less volatility. Trailing P/E (price/earnings)– The sum of a company’s price-to-earnings, calculated by taking the current stock price and dividing it by the trailing earnings per share for the past 12 months. Wide Moat – a type of sustainable competitive advantage possessed by a business that makes it difficult for rivals to wear down its market share. Upside/Downside Capture– The ratio of the upside and downside of an investment versus a benchmark. These ratios explain how an investment typically performs in relation to a benchmark index. Yield Curve (Curve)- A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The views expressed are those of Amundi US and are current through June 30, 2024. These views are subject to change at any time based on market or other conditions, and Amundi US disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for strategies are based on many factors, may not be relied upon as an indication of trading intent on behalf of any portfolio. A Word about Risk The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. The Fund generally excludes corporate issuers that do not meet or exceed minimum ESG standards. Excluding specific issuers limits the universe of investments available to the Fund, which may mean forgoing some investment opportunities available to funds without similar ESG standards. The Fund is subject to currency risk, meaning that the Fund could experience losses based on changes in the exchange rate between non-U.S. currencies and the U.S. dollar. The market price of securities may fluctuate when interest rates change. When interest rates rise, the prices of fixed income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Fund will generally rise. The Fund may use derivatives, which may have a potentially large impact on Fund performance. Before investing, consider the product’s investment objectives, risks, charges and expenses. Contact your financial professional or Amundi Asset Management US for a prospectus or a summary prospectus containing this information. Read it carefully. Individuals are encouraged to seek advice from their financial, legal, tax and other appropriate professionals before making any investment or financial decisions or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or investment recommendation. Securities offered through Amundi Distributor US, Inc. Underwriter of Pioneer mutual funds, Member SIPC 60 State Street, Boston, Massachusetts 02109 ©2024 Amundi Asset Management US

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