Is Climate Action a Good Investment Criteria?

Exposure to environmental progress could be a good idea in the current market environment.

RonDay
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Managing Editor
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Reviewed by: Ron Day
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Edited by: Ron Day

Among 10 exchange-traded funds with the highest exposure to so-called climate action, more than half of them are beating the S&P 500, which so far this year has lost 9.5%.  

Morningstar's recent study highlighted the 10 funds most exposed to climate action, defining the term as “the global effort to curb the Earth’s temperature rise and cope with unavoidable consequences.” Green building and renewable energy are examples of a company’s climate actions, the article said.  

The Global X Renewable Products ETF (RNRG) is almost entirely exposed to climate action, with 89% of its assets in that space. This small ETF, with $108 million in assets under management, has gained 1.4% this year, through Aug. 19.  

The First Trust Global Wind Energy (FAN)  and the VanEck Low Carbon Energy (SMOG)  both have 85% of their assets exposed to climate action: FAN narrowly beats the S&P 500, with a 6.4% loss this year, and SMOG lags the index, with a 13% decline. 

While each fund has its own investing style, the bigger vehicles slightly edged out the smaller ones performancewise. The Invesco Solar ETF (TAN) is the second biggest among the climate-action funds, with an AUM of $2.31 billion; it has gained 13% so far this year.  

The iShares Global Clean Energy Fund (ICLN) was the biggest of the bunch, at $4.79 billion in assets. It has gained 5.5% this year. The ETF is 81% exposed to climate action.  

 

Top Funds With Climate Action Exposure

TickerFundYTD (%)Climate Action Exposure (%)AUM ($)
TANInvesco Solar ETF+13.084.02.31B
ICLNiShares Global Clean Energy ETF+5.580.84.79B
FRNWFidelity Clean Energy ETF+5.082.928M
RNRGGlobal X Renewable Energy Producers ETF+1.488.7102M
FANFirst Trust Global Wind Energy ETF-6.485.0286M
WNDYGlobal X Wind Energy ETF-9.682.44M
SMOGVanEck Low Carbon Energy ETF-13.085.0229M
GBLDInvesco MSCI Green Building ETF-16.078.85M
KGRNKraneShares MSCI China Clean Technology Index ETF-20.076.7159M
SPYSPDR S&P 500 ETF Trust-9.5  

Source: Morningstar

Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.