ESG
Environmental themes like renewable energy, electric vehicles and battery storage can be more enticing when pooled in funds.Thematic green ETFs and mutual funds allow you to zero in on a specific area of the fight against climate change, from electric-vehicle batteries to solar power.
These funds deliver the benefit of diversification and can hold shares in burgeoning companies that you might feel uncomfortable buying on your own because they have no profits and short histories as publicly traded stocks.
What’s more, a lot of leading sustainable companies are based overseas – so you may not be able to buy shares in them, but these funds can.
KraneShares Electric Vehicle and Future Mobility ETFTake KraneShares Electric Vehicle and Future Mobility ETF (KARS). The green exchange-traded fund tracks a global index that includes companies throughout the EV ecosystem – from auto and battery makers to autonomous driving technology (sensors), charging stations and raw materials.
KARS owns shares in several EV battery makers, including Contemporary Ameperex Technology Co., better known as CATL, the world’s largest lithium battery maker; its shares trade only in China. Other holdings are new issues. Shares in EV maker Lucid (LCID), for instance, went public last July. The fund has had high volatility over the past three years, but its three-year annualized return of 33.9% tops all industrial-sector funds.
Global X Lithium & Battery Tech ETFBattery manufacturing must increase dramatically (some estimates say by 80-fold) if electric vehicle sales are to progress as expected. Global X Lithium & Battery Tech ETF (LIT) tracks an index of lithium mining and refining companies and battery makers around the world.
U.S. lithium firm Albemarle (ALB), as well as Tesla (TSLA) and TDK (TTDKY), a Japanese electronics company, are top holdings. Expect high volatility. However, the fund boasts an impressive three-year annualized return of 40.2%.
Invesco WilderHill Clean Energy ETFInvesco WilderHill Clean Energy ETF (PBW) is a member of the Kiplinger ETF 20, the list of our favorite exchange-traded funds. It covers a range of renewable-energy sources – wind, solar, hydro, geothermal and biofuel – and clean-energy tech.
The fund has been clobbered recently; its one-year return is a whopping 57.5% loss. But its three-year annualized return, 30.4%, still stands in good stead.
TrueShares ESG Active Opportunities ETFFor a broad portfolio, consider TrueShares ESG Active Opportunities ETF (ECOZ), an actively managed green ETF that invests in companies with low carbon footprints.
The managers favor a specific measure: greenhouse gas intensity. How many tons of GHG are emitted per $1 million of revenue? The GHG intensity of the fund’s holdings is 85% lower than that of the stocks in the S&P 500 on average, says TrueShares chief investment officer Jordan Waldrep.
ECOZ has returned 24.2% annualized since its inception in early 2020, which trails the 26.3% gain in the S&P 500.
iClima Global Decarbonization Transition Leaders ETFiClima Global Decarbonization Transition Leaders ETF (CLMA) tracks a proprietary index of innovative companies that deliver products or services making an eco-friendly impact. The green ETF’s holdings include offshore wind energy company Orsted (DNNGY); the all-electric East Japan Railway; and Oatly (OTLY), a plant-based foods company.
Says iClima’s Gabriela Herculano: “A lot of funds, think let’s invest in companies doing less harm. We want to focus on innovation. We’re looking forward, looking to the solution.” The fund opened in July 2021.
Fidelity Climate ActionFidelity Climate Action (FCAEX) is also intriguing. Asher Anolic runs this new, actively managed green mutual fund, which launched in June. It invests in global companies that work to address climate change (or its impacts) through corporate strategies or by providing technology, services or products.
Microsoft (MSFT), Alphabet (GOOGL) and Nvidia (NVDA) are among FCAEX’s top holdings.
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