Will the new climate change ETFs make an impact?
VanEck and BetaShares have both recently brought new climate change-focused exchange traded funds (ETFs) to the market, but will the contents of the ETFs deliver on impact?
According to FE Analytics, there were currently 10 ETFs that were labelled as ethical/sustainable, but all relied on ethically-based screening that left out negative industries like fossil fuels. This was opposed to impact-focused funds that invested in companies working to negate the effects of climate change, like clean energy.
VanEck launched the VanEck Vectors Global Clean Energy ETF, which tracked the S&P Global Clean Energy index and compromised 30 equities.
The top holdings were hydrogen fuel cell manufacturer Plug Power, tech-based home energy provider Enphase Energy, solar photovoltaic manufacturer DAQO New Energy, Austrian electricity provider Verbund, and Siemens Gamesa Renewable Energy.
The BetaShares Climate Change Innovation ETF tracked the Solactive Climate Change Environmental Opportunities index which was comprised of 96 equities.
The top holdings in that index were semiconductor manufacturer Infineon Technologies, sustainable manufacturers Trane Technologies and Compagnie De Saint Gobain, video conference software Zoom, Docusign, and Tesla.
Although there was no performance data yet for the ETFs, the index tracked by the Van Eck fund had an annualised return of 43.6% over the last three years to 28 February, 2021, while the index tracked by the BetaShares fund had an annualised return of 36.62%.
Alex Vynokur, BetaShares chief executive, said the potential catastrophic impact of climate change could not be overstated, but those challenges presented opportunities.
“The scale of the challenge the world faces means that innovation is called for in a range of climate- and environmentally-friendly activities,” Vynokur said.
“A focus on renewable energy is essential, but the deep cuts to carbon emissions that will be required to limit global warming cannot be achieved by clean energy alone.”
The BetaShares fund would not solely focus on clean energy, but also electric vehicles, energy efficient technologies, sustainable food, water efficiency and pollution control.
“In short, a broad range of solutions that directly enable the reduction or avoidance of carbon emissions – this is the essential objective if the world is to effectively address climate change,” Vynokur said.
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