Daily ETF Watch: Low-Carbon Funds Planned

iShares and SSgA file for matching ETFs.

The two largest ETF providers both filed for funds tracking the same low-carbon index just days apart, setting up an interesting face-off.

Early last week, State Street Global Advisors filed for the SPDR MSCI ACWI Low Carbon Target ETF, and just a few days later, on Friday, iShares filed paperwork on the iShares MSCI ACWI Low Carbon Target ETF.

The proposed funds’ underlying index is designed to overweight companies that have low carbon emissions and is derived from the MSCI All Country World Index, which covers both emerging and developed markets, according to the prospectuses of both funds. Weightings are determined by each company’s “carbon exposure,” which is based on greenhouse gas emissions and potential fossil-fuel-generated greenhouse gas emissions.

The index is designed to maintain a tracking error that is within 30 basis points of the performance of the MSCI ACWI and limits the weight of a company to no more than 20 times its weight in the MSCI ACWI.

Country and sector weights must be within 2 percent of their weights in the MSCI ACWI, but the energy sector is not subject to any limits, according to the prospectuses.

Neither filing provided an expense ratio or ticker, but the SPDR fund is slated to list on the NYSE Arca.

Either fund has the potential to be first-to-market in terms of carbon emissions weighting. Although there are a number of funds investing in companies involved in clean energy activities, there is not yet a fund that weights companies from every industry by their environmental effect.

Lattice Files For First Funds
Lattice Strategies, an investment management firm that first filed for ETF exemptive relief at the end of May, recently put five funds into registration that tackle core asset classes via in-house “risk-optimized” and smart-beta indexes.

The Lattice International Equity Strategy ETF will track the Lattice Developed Markets Strategy Index which screens for components that exhibit strong quality, momentum and valuation characteristics, while falling within certain risk boundaries, according to the prospectus.

The other four funds will be based on indexes that have a similar focus on risk and factors; they include:

• Lattice Emerging Markets Strategy ETF
• Lattice Real Estate Strategy ETF
• Lattice U.S. Large Cap Equity Strategy ETF
• Lattice U.S. Small Cap Equity Strategy ETF

The filing did not include tickers or expense ratios.