Fight Global Warming with These ETFs
Establishing a terror-free world may be the foremost agenda on the international level now, but global warming issue is equally heated. While so long it was presumed that global warming leads to climate change causing rising sea levels, drought in one region and flood in other, the latest theory is that this monster can “cause job losses, recessions and even a tumbling stock market” according to economists. So, one can easily understand the urgency of controlling pollution and cooling down the globe.
In that vein, global leaders assembled in Paris at the COP 21 meet – which is the 21st annual conference of parties – to chalk out an elaborate and comprehensive plan for lowering carbon emissions and moderating the warming of the planet. Efforts to arrest global warming have been constant across individual countries.
Now, not only developed economies, but the emerging ones too are pushing themselves to attain this goal.
China intends to build a pollution-free environment. As part of this mission, the president of China and U.S. president Barack Obama have recently struck a deal to lessen carbon emissions. The agreement calls for carbon emission reductions by 26% to 28% in the U.S. by 2025. It also includes the first-ever commitment by China to stop emissions from growing by 2030. Notably, China and America are two largest emitters of greenhouse gases (read: Green ETFs & Stocks for Earth Day).
President Obama has always been active in cleaning up carbon pollution. A proposed Environmental Protection Agency rule seeks to reduce 30% carbon emission from power plants by 2030 from the levels emitted in 2005. At the conference, the Russian President noted that his country has not only averted the rise of greenhouse emissions, it has actually slowed it. Russia targets to curb 70% of greenhouse emissions by 2030 from the levels seen in 1990.
At the Paris meet that is underway, global superpowers will also decide on supporting underprivileged countries like Bangladesh and Indonesia to finance the needed reforms they can’t pay for.
Investors can also make outsized profits from this awareness on global warming. Several clean energy and low-carbon ETFs have been rolled out to capitalize on the growing need for environment protection and reduce greenhouse gas emissions. Below we highlight a few ETF options that investors can go “green” with (read: Protect Your Environment with These ETFs).
The SPDR MSCI ACWI Low Carbon Target ETF (LOWC)
This has become an $87.6 million ETF within just one year of its launch. The 1,277-stock ETF looks to track the stocks from developed and emerging markets that discharge lower carbons. The fund charges only 20 bps in fees.
Here too, Apple (1.9%) takes the top spot followed by Microsoft (1.17%) and General Electric (0.85%). The fund is heavy on the U.S. which has half of total exposure, while Japan (7.9%) and the U.K. (7.1%) take the next two spots. LOWC is down about 0.9% so far this year (as of November 30, 2015).
iShares MSCI ACWI Low Carbon Target ETF (CRBN)
The 931-stock fund also charges 20 bps in fees a year from investors. The fund has amassed over $217 million in assets since its debut in December 2014. Exposure is quite similar to LOWC as Apple (1.92%), Microsoft (1.17%) and General Electric (0.82%) are top three holdings. Its geographic exposure is also pretty much like LOWC.
Etho Climate Leadership U.S. ETF (ETHO)
This new ETF has a 400-stock portfolio having a carbon emissions profile that is 50–70% lower per dollar invested than a conventional broad-based benchmark. The index studies total greenhouse gas emissions from over 5,000 equities to choose ‘climate leaders’ in each industry. No stock accounts for more than 0.56% of the basket. Netflix, M&T Bank Corp. and Energy Recovery Inc. are the top three holdings of the fund, which charges 75 bps in fees (read: How to Invest 'Fossil-Free' with This New ETF?).
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SPDR-MSCI ALC (LOWC): ETF Research Reports
ISHARS-M L CRBN (CRBN): ETF Research Reports
ETHO-CLMT LEADR (ETHO): ETF Research Reports
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