Gone are the days when ETF investing ideas revolved around plain vanilla concepts like market capitalization, earnings growth or dividend payments. Tweaks and turns have become common in ETF launches these days to allure investors. In niche themes, a surge in eco-friendly and socially conscious ETFs was prevalent.
The concept has rapidly gained acceptance and buoyed by this trend, State Street Global Advisors has filed for an ETF consisting of companies releasing less carbon in late September.
Proposed Fund in Detail
The SPDR MSCI [ACWI] Low Carbon [Target] ETF looks to track an index comprising stocks from developed and emerging markets that emit lower carbons. Per the prospectus, the index emphasizes ‘companies with low carbon emissions relative to sales and per dollar of market capitalization’.
The index of the ETF looks to track a popular benchmark – MSCI ACWI Index – with a focus on minimal ‘carbon exposure’. The forerunner index basically replicates the stock market performance of developed and emerging market countries. The concerned index first screens stocks on the basis of ‘carbon exposure’ from the index, as per the prospectus.
Apart from the focus on carbon, the concerned index looks after several other criteria while choosing the stocks including limitations on tracking error, cap on individual security weight as well as country and sector weight. Ticker code and expense ratio of the proposed ETF are not yet disclosed.
How Does it Fit in a Portfolio?
Most nations have become eco-friendly at present. Building a ‘low-carbon’ economy and fighting global warming have become a common theme among the most developed and emerging nations. Recently, China announced that it intends to build a pollution free environment.
Demand for renewable sources is growing rapidly for electricity generation across the globe. Thus, many investors might want to support ‘green’ companies or those that responsibly discharge less of the ‘black’ material (read: 3 Clean Energy ETFs for a Green Portfolio).
This ETF falls in the category of socially responsible funds. Socially responsible investing gives an opportunity to the investor to meet their financial requirements, and at the same time, to mull over the impact of corporations on society.