Fossil Fuel Free ETFs That Aren't

March 14, 2018

Clean energy remains the most popular theme among environmental, social and governance (ESG) ETFs. Nearly two-thirds, or 64%, of the $6.3 billion currently invested in them are held in funds carrying some kind of screen for greenhouse gas emissions or for involvement in the coal, oil and natural gas industries.

Yet the vast majority of these ETFs still invests in the users and producers of fossil fuels—even the ones marketing themselves as being fossil fuel free.

Weightings in "dirty energy" companies range from 1.73% held by the Etho Climate Leadership U.S. ETF (ETHO) to 18.34% held by the Columbia Sustainable U.S. Equity Income ETF (ESGS).

Even ETFs marketed specifically for their avoidance of companies involved in fossil-fuel-related activites, such as the SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX), still hold companies in oil, coal and natural gas: SPYX, for example, holds 5.72% of its portfolio in oilfield services firms and coal-fired utilities.

Worst Offenders

We compared the 65 socially responsible ETFs to the Fossil Free Funds' database, which allows investors to search more than 3,000 mutual funds and ETFs for holdings in oil/gas E&P firms, coal producers, fossil-fuel-fired utilities and other "dirty energy" sources.

Fossil-free funds designates a stock as a fossil fuel company using Morningstar industry classifications and third-party proprietary research on fossil fuel reserves, emissions output and more.

Although at least 31 ESG ETFs screen for greenhouse gas emissions and/or company involvement in fossil fuels, only six funds had portfolios completely free of fossil-fuel-related firms.

 

100% Fossil-Fuel-Free ESG ETFs
Ticker Fund AUM ($M) Screens for carbon emissions and/or fossil fuel companies? Notes
TAN Guggenheim Solar ETF 390.02 N Companies involved in solar power production and services to solar power industry
PZD PowerShares Cleantech Portfolio 165.63 Y Companies whose businesses attempt to reduce/mitigate environmental impact from carbon emissions and climate change
NUMG NuShares ESG Mid-Cap Growth ETF 41.04 Y Caps maximum allowable carbon emissions in calculating ESG scores for constituents
MPCT iShares MSCI Global Impact ETF 29.55 ? Companies must meet at least one UN Sustainable Development Goals, one of which is "Affordable and Clean Energy"
KGRN KraneShares MSCI China Environment ETF 7.37 N Chinese companies for whom at least 50% of revenues involve alternative energy, energy efficiency, sustainable water, green building and pollution prevention
CHGX Change Finance Diversified Impact U.S. Large Cap Fossil Fuel Free ETF 3.85 Y No oil, gas or coal producers, processors, servicers, or utilities burning fossil fuels 

Sources: ETF.com, FactSet, Fossil Free Funds. Data as of March 12, 2018.

 

The 10 ESG ETFs with the highest concentration of fossil fuel stocks in their portfolios are listed below:

 

ESG ETFs With The Top 10 Largest Portfolio Allocations To Fossil Fuel Companies
Ticker Fund AUM % Invested In Fossil Fuels $M Invested In Flagged Cos. Top Flagged Company Screens for Carbon Emissions or Fossil Fuels? Screens for Carbon Emissions or Fossil Fuels? Notes
FAN First Trust Global Wind Energy ETF $89.44M 24.10% 14 21.54 Mitsui & Co Ltd. N Companies involved in wind power production and servicing
ESGS Columbia Sustainable U.S. Equity Income ETF $4.51M 18.34% 16 0.82 SCANA Corp. Y Uses carbon emissions as part of its ESG scoring process
ICLN iShares Global Clean Energy ETF $153.17M 18.04% 5 27.37 Enel Americas SA ADR N Invests in makers of renewable energy technologies
BLES Inspire Global Hope ETF $56.94M 16.24% 49 8.89 Petroleo Brasileiro SA Petrobras ? Chooses companies, among other criteria, on the basis of "protecting the environment"
BIBL Inspire 100 ETF $10.69M 14.10% 14 1.48 Schlumberger Ltd ? Chooses companies, among other criteria, on the basis of "protecting the environment"
ESGW Columbia Sustainable Global Equity Income ETF $7.52M 13.27% 28 1.19 SCANA Corp. Y Uses carbon emissions as part of its ESG scoring process
NULV NuShares ESG Large-Cap Value ETF $34.63M 12.53% 12 4.3 Schlumberger Ltd Y Caps the maximum allowable carbon emissions
ESGF Oppenheimer Global ESG Revenue ETF $23.49M 12.09% 124 3.12 Royal Dutch Shell PLC Class A Y Uses carbon emissions as part of its ESG scoring process
ESGD iShares MSCI EAFE ESG Optimized ETF $194.73M 10.66% 40 21.16 Total SA Y Uses carbon emissions as part of its ESG scoring process
ESG FlexShares STOXX U.S. ESG Impact Index Fund $20.98M 10.29% 22 1.98 Exxon Mobil Corp. Y Uses carbon emissions as part of its ESG scoring process

Sources: ETF.com, FactSet, Fossil Free Funds. Data as of March 12, 2018.

 

 

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