Make Your Portfolio Eco-Friendly: ETFs For Earth Day

Every year, Earth Day reminds us the significance of keeping our planet clean. And although we give special attention to this necessity on Apr 22, our planet ought to be taken care of on all 367 days. This is especially important as global warming is on the rise and 2015 was the hottest year..Thankfully, countries across the globe are taking proactive measures in protecting Mother Earth.

The U.S. has been at the forefront with Obama’s ‘Climate Change Action Plan’. Then China joined the league in 2014 to build a pollution-free environment and struck a joint deal with President Obama to reduce greenhouse gases. As per the deal, the U.S. is expected to lessen 26–28% in carbon emissions by 2025 while China pledged to cut carbon emissions by 2030. Both U.S. and China are the world’s largest polluters and account for more than one-third of greenhouse gas emissions.

Additionally, in December, about 195 countries agreed to a historical deal in Paris to curb global warming to a maximum limit of two degrees Celsius with a goal of lowering it further to about 1.5 degrees as soon as possible. Per the pact, rich countries like the U.S. and those in Europe will provide $100 billion per year to poorer nations to help them to eliminate greenhouse gasses by 2020. This is expected to bring an end to the fossil fuel era and enhance global climatic conditions (read: Inside the Recent Surge in Clean Energy ETFs).

As a result, a number of companies have stepped up their efforts to maintain ecological balance by reducing fossil fuel reserves and limiting carbon emission. In order to tap this trend, many investors are looking to eliminate fossil fuels-related exposure from their portfolios and invest in cleaner alternatives on Earth Day. For them, we have highlighted several ETFs that could make for the excellent portfolios for the long term:
Etho Climate Leadership U.S. ETF (ETHO - ETF report)
This fund offers exposure to the companies with the most climate-efficient and socially responsible profiles within their respective industries by tracking the Etho Climate Leadership Index. It holds a broad basket of 389 securities that are well diversified across components with none holding more than 0.45% share. Information technology takes the top spot in terms of sector exposure at 22%, followed by industrials, consumer discretionary, financials and healthcare. The product has amassed $2.5 million in its asset base while trades in average daily volume of around 2,000 shares. It charges 45 bps in annual fees from investors.
SPDR S&P 500 Fossil Fuel Free ETF (SPYX - ETF report)
This fund follows the S&P 500 Fossil Fuel Free Index, which measures the performance of companies in the S&P 500 Index that do not own fossil fuel reserves. Holding 472 stocks in its basket, the fund is well spread across each component as none of them holds more than 3.44% of assets. Here too, information technology is the top sector accounting for 31.7% while financials, healthcare and consumer discretionary round off the next three spots. The ETF has been able to gather $72.9 million in its asset since its debut in November 15 and charges 20 bps in fees per year from investors. Volume is light exchanging 19,000 shares in hand a day on average (read: Fossil Free ETFs Head to Head: ETHO vs SPYX).
Huntington EcoLogical Strategy ETF (HECO - ETF report)
This is an actively managed ETF that offers exposure to ecologically focused companies that have positioned their business to respond to increased environmental legislation, cultural shifts toward environmentally conscious consumption, and capital investments in environmentally oriented projects. It holds 25 stocks in its basket with each holding less than 3.13% of assets. Consumer staples, information technology, financials and consumer discretionary and industrials are the top five sectors with a double-digit allocation each. Expense ratio came in at 0.95%. The fund has AUM of $6.2 million and trades in a paltry volume of under 1,000 shares.

iShares MSCI ACWI Low Carbon Target ETF (CRBN - ETF report)
This ETF provides investors’ global exposure to the companies that are less dependent on fossil fuels by tracking the MSCI ACWI Low Carbon Target Index. Holding 1,045 stocks in its basket, no single security holds more than 1.69% of assets. American firms account for half of the portfolio while other countries like Japan, United Kingdom and Canada receive single-digit exposure each. From a sector look, financials takes the top spot at 21.2% while information technology, consumer discretionary and industrials round off the top three with a double-digit exposure each. CRBN has AUM of $224.6 million and average daily volume of 6,000 shares. It charges 20 bps in fees and expenses (read: Fight Global Warming with These ETFs).
SPDR MSCI ACWI Low Carbon Target ETF (LOWC - ETF report)
With AUM of $93.3 million, this fund also tracks the same index as that of CRBN with the same expense ratio. It holds 1,380 stocks in its basket with none holding more than 1.66% share. Here again, financials is the top sector holding 21.4% and the U.S., is the top country. However, compared to CRBN, LOWC trades in lower volume of less than 1,000 shares.

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.