Issuers Continue to Plan ESG-Related ETFs

January 09, 2023

The anti-woke investing trend does not seem to be putting too much of a damper on environmental, social and governance-related ETFs, as at least three filings for such funds have been made in the past 30 days.

There’s been a backlash against ESG investing, especially in the area of pensions, though in the ETF industry, Strive Asset Management has launched several funds that disregard ESG criteria, which include clauses in their prospectuses. Those documents also note the issuer will lobby for practices that maximize profits at the companies the funds hold. 

However, the ESG category in the ETF industry continues to grow, as the below filings would suggest. 

Global X has filed for the Global X Carbon Credits Strategy ETF, which will be tied to the ICE Global Carbon Futures Index. The index targets the most actively traded carbon credit futures. The futures contracts must feature physical delivery of emission allowances that have been determined as part of a cap-and-trade program, according to the prospectus.

The issuer has a range of ETFs that invest in clean energy or values-based strategies, but this is its first fund to target carbon credits.

Relative ETF newcomer Touchstone is taking a slightly different angle by filing for the Touchstone Climate Transition ETF (HEAT), which will be actively managed by Lombard Odier Asset Management (USA) Corp.

The fund will invest in equities in both emerging and developed markets, and will focus on companies likely to benefit from the transition to a low-carbon economy, dividing its holdings into three subgroups that include solution providers, transition leaders and adaptation opportunities, the prospectus says.

Touchstone launched four ETFs in 2022, but HEAT will be its first ETF to focus on companies’ environmentally related activities. 

DWS, which already has an extensive lineup of ESG-related ETFs, is planning to launch the Xtrackers MSCI USA Climate Action Equity ETF, which will track the MSCI USA Climate Action Index. The fund will target companies that are being proactive about the climate transition relative to their sector peers. The underlying index looks to represent about half of the companies in each sector as defined by the Global Industry Classification Standard, the fund filing says.

Companies must pass screens regarding their exposure to ESG controversies; business activities; emissions and fossil fuel reserves; and their climate management and ESG ratings.

The prospectus further notes the index had 313 securities as of the end of November 2022, with technology and health care the most heavily weighted sectors, at 25.6% and 18.1%, respectively.

 

Contact Heather Bell at [email protected] 

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