Is Climate Action a Good Investment Criteria?

August 23, 2022

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

Ticker Fund YTD (%) Climate Action Exposure (%) AUM ($)
TAN Invesco Solar ETF +13.0 84.0 2.31B
ICLN iShares Global Clean Energy ETF +5.5 80.8 4.79B
FRNW Fidelity Clean Energy ETF +5.0 82.9 28M
RNRG Global X Renewable Energy Producers ETF +1.4 88.7 102M
FAN First Trust Global Wind Energy ETF -6.4 85.0 286M
WNDY Global X Wind Energy ETF -9.6 82.4 4M
SMOG VanEck Low Carbon Energy ETF -13.0 85.0 229M
GBLD Invesco MSCI Green Building ETF -16.0 78.8 5M
KGRN KraneShares MSCI China Clean Technology Index ETF -20.0 76.7 159M
SPY SPDR S&P 500 ETF Trust -9.5    

Source: Morningstar

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