Daily ETF Watch: ‘Carbon’ Fund Planned

September 26, 2014

SSgA comes forth with plans for a fund that cherry-picks companies that are less likely to contribute to climate change.

State Street Global Advisors, breathing new life into the notion that just about anything can be packaged in an exchange-traded fund, filed regulatory paperwork detailing a global equity fund focused on the mechanics of climate change that would overweight companies that have low carbon emissions.

The “SPDR MSCI [ACWI] Low Carbon [Target] ETF,” the name provided in the preliminary prospectus, will be based on the MSCI ACWI Low Carbon Target Index. It’s a subset of the MSCI ACWI Index, which canvasses the entirety of the investable equity universe in the entire world.

“By overweighting companies with low carbon emissions relative to sales and per dollar of market capitalization, the index aims to reflect a lower carbon exposure than that of the broad market,” according to the prospectus. The document contained numerous other details about how the constituents of the index would be gathered. The SSgA fund will use representative sampling, which means it won’t have to own all the securities in the index.

The focus on lower carbon emissions makes the fund an ETF expression of one of the hottest and most contentious issues in the world today. While some countries such as Germany are forging forward with ambitious and expensive plans to develop alternatives to fossil fuels, other parts of the world including the U.S. are wrangling about whether climate change is a genuine problem and what to do about it.

That said, the Rockefeller Brothers Fund, the portfolio of legendary oilman John D. Rockefeller’s descendants, elected this week to divest itself of any fossil fuel-type investments, a provocative metaphor for how investor mentality may be shifting regarding the climate change/global warming issue. It aims to cut such investments to less than 1 percent by the end of 2014, according to information posted on its website.

SSgA’s prospectus didn’t include a price or a proposed ticker for the low-carbon-target fund.

 

 

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