The fund is actively managed, taking a high-conviction approach to investing in companies that have a strategy to create value in the transition to net zero goals. The process will result in a portfolio of between 25 and 50 names.
Yasmin Dahya Bilger, managing director and head of ETFs for Engine No. 1, says the firm’s choice to focus on climate issues for its first thematic ETF is due to the clear link between decarbonization efforts and shareholder value.
“We’re an investment firm that is tying environmental and social issues to the creation of shareholder value,” she said. “Climate is obviously one of the big issues that we need to tackle. From our point of view, climate’s link to value creation is clear.”
Per the ETF’s prospectus, the fund invests in companies that are creating value by transforming themselves or others to meet the growing demands of climate change, spanning sectors such as agriculture, consumer, energy, technology, transportation and utilities. Highlighting this sector breadth, top holdings within the portfolio include GM, Deere and Occidental.
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Bilger notes that unlike other climate-focused ESG funds, NETZ will not necessarily avoid holding “brown” legacy companies.
“Most climate strategies are oriented around this idea that a good climate strategy screens away or reduces exposure to the largest emitters,” she explained. “We go the opposite direction. You can’t solve a problem by running away from it.”
“From our perspective, that’s the hunting ground for an investment opportunity; the real work is [identifying] which of the incumbents in those spaces are the ones that have the plan we think will successfully transition,” Bilger added.
NETZ will have an expense ratio of 0.75% and trade on Cboe Global Markets.