Fossil Free ETFs Head to Head: ETHO vs SPYX
Pollution and global warming caused by fossil fuel has been on the rise lately. Global superpowers are leaving no stone unturned to restrict greenhouse emissions, protect the climate and go eco-friendly.
President Obama has always been active in cleaning up carbon pollution. A proposed Environmental Protection Agency rule even seeks to reduce 30% carbon emission from power plants by 2030, compared to the levels in 2005.
China announced its intent to build a pollution-free environment. And as part of this mission, the president of China and the U.S. president Barack Obama struck a deal to lessen carbon emissions (read: Fight Global Warming with These ETFs).
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. Not only from the social perspective, it has also been noticed that fossil fuels cast a dark shadow on economies and the associated stock markets. The latest theory is that this monster can “cause job losses, recessions and even a tumbling stock market” according to economists.
It is perhaps because of this grave concern that we received two fossil-fuel ETFs from issuers, namely, Etho Climate Leadership U.S. ETF (ETHO) and SPDR S&P 500 Fossil Fuel Free ETF (SPYX) within just one month. Below we detail these two funds and highlight their key differences:
ETHO in Focus
This new ETF has a 398-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 0.63% of the basket. Netflix, M&T Bank Corp. and Universal Display Corp. are the top three holdings of the fund, which charges 75 bps in fees (read: How to Invest 'Fossil-Free' with This New ETF?).
Technology is the fund’s top priority with 23% exposure while industrial, consumer cyclical, financial and health care also have sizable weights. The fund puts 41% in mid-cap stocks while large caps rake in about 37% of the basket with the rest going to small-cap stocks. The fund has a tilt toward growth stocks with 57% exposure followed by 22% focus on blend and 21% in value stocks.
SPYX in Focus
The fund looks to tracks 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. The 473-stock fund is heavy on Information Technology (22.37%). Financials, Health Care, Consumer Discretionary, Consumer Staples and Industrials have double-digit weight in the fund.
No stock accounts for 3.92% of the portfolio. Apple takes the top position followed by Microsoft (2.60%) and General Electric (1.66%). The fund charges 20 bps in fees. Capitalization-wise, the fund puts about 90% in large caps. Here too, growth stocks take about 48% weight followed by value stocks (29%) (read: Support the Environment and Profit with Fossil Fuel Free ETFs).
| ETHO | SPYX |
Index | The Etho Climate Leadership Index | the S&P 500 Fossil Fuel Free Index |
Expense Ratio | 0.75% | 0.20% |
Company concentration risks | Extremely low | Relatively high |
Index composition | Equal weighted | Capitalization-weighted |
Capitalization | Multi-Cap | Large-cap |
Style | Blend with a focus on growth (57%) | Blend with a focus on growth (48%) |
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ETHO-CLMT LEADR (ETHO): ETF Research Reports
SPDR-SP5 FF FRE (SPYX): ETF Research Reports
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