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Is Climate Action a Good Investment Criteria?

Among 10 exchange-traded funds with the highest exposure to so-called climate action, more than half of them are beating the S&P 500, which so far this year has lost 9.5%.

Morningstar's recent study highlighted the 10 funds most exposed to climate action, defining the term as “the global effort to curb the Earth’s temperature rise and cope with unavoidable consequences.” Green building and renewable energy are examples of a company’s climate actions, the article said.

The Global X Renewable Products ETF (RNRG) is almost entirely exposed to climate action, with 89% of its assets in that space. This small ETF, with $108 million in assets under management, has gained 1.4% this year, through Aug. 19.

The First Trust Global Wind Energy (FAN)  and the VanEck Low Carbon Energy (SMOG)  both have 85% of their assets exposed to climate action: FAN narrowly beats the S&P 500, with a 6.4% loss this year, and SMOG lags the index, with a 13% decline.

While each fund has its own investing style, the bigger vehicles slightly edged out the smaller ones performancewise. The Invesco Solar ETF (TAN) is the second biggest among the climate-action funds, with an AUM of $2.31 billion; it has gained 13% so far this year.

The iShares Global Clean Energy Fund (ICLN) was the biggest of the bunch, at $4.79 billion in assets. It has gained 5.5% this year. The ETF is 81% exposed to climate action.

 

Top Funds With Climate Action Exposure

Ticker

Fund

YTD (%)

Climate Action Exposure (%)

AUM ($)

TAN

Invesco Solar ETF

+13.0

84.0

2.31B

ICLN

iShares Global Clean Energy ETF

+5.5

80.8

4.79B

FRNW

Fidelity Clean Energy ETF

+5.0

82.9

28M

RNRG

Global X Renewable Energy Producers ETF

+1.4

88.7

102M

FAN

First Trust Global Wind Energy ETF

-6.4

85.0

286M

WNDY

Global X Wind Energy ETF

-9.6

82.4

4M

SMOG

VanEck Low Carbon Energy ETF

-13.0

85.0

229M

GBLD

Invesco MSCI Green Building ETF

-16.0

78.8

5M

KGRN

KraneShares MSCI China Clean Technology Index ETF

-20.0

76.7

159M

SPY

SPDR S&P 500 ETF Trust

-9.5

 

 

Source: Morningstar

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