Procure ETF Takes a Twist on Climate Change Investing

As of mid-September, the U.S. had experienced a record 23 individual billion-dollar weather- and climate-related disasters this year, a number that’s likely to climb with three months left in the calendar.

Just in August, a tropical storm brought record-breaking rains to southern California, record heat baked the Plains, Midwest and South, and the deadliest wildfire in more than 100 years swept through Maui, according to the National Oceanic and Atmospheric Administration.

As these costly storms grow, more homes and businesses will be rebuilt. The passively managed Procure Disaster Recovery Strategy ETF (FIXT) tracks a portfolio of companies engaged in recovering from natural disasters, such as hurricanes, wildfires, floods or earthquakes.

A 'Recovery' ETF

Andrew Chanin, the co-founder and CEO of ProcureAM who experienced both Hurricane Katrina in New Orleans and Superstorm Sandy in New York, says while there are plenty of ETFs that focus on companies that are trying to reduce carbon footprints or mitigate the effects of climate change, until now, no exchange-traded fund focused on the types of products and services people and businesses need to recover after weather disasters.

“The actual financial costs of natural disasters seem to be gradually increasing over time,” Chanin says. “The idea was to develop an index that looks at the companies that are helping us before natural disasters hit and helping us rebuild after natural disasters.”

ProcureAM may be a small firm, but Chanin has launched unique ETFs in the past when he was CEO at PureFunds, including the first cybersecurity ETF, now issued by ETFMG, the ETFMG Prime Cyber Security ETF (HACK).

FIXT is a global, index-based thematic ETF with about 50 holdings and an expense ratio of 0.75%. It’s heavily weighted in industrials, at 62% of the fund. Consumer cyclical and technology stocks round out most of the other holdings. It’s an equal-weight fund, and so no single equity dominates.

The top holding is Rev Group, which builds emergency vehicles, such as fire trucks and ambulances, plus recreational vehicles and commercial trucks. Other holdings include Canada-based engineering firm SNC-Lavalin Group and Japanese technology firm NEC Corp. Nvidia is also a holding, and it has helped support the fund’s 18% year-to-date return.

While owning Nvidia might raise a few eyebrows, Chanin says governments can use the chip maker to model what areas are higher risk for natural disasters, and its technology can also help build smart-energy grids.

Other notable companies include MSA Safety, a safety-equipment supplier and home improvement retailer Home Depot.

Despite its heavy tilt to industrials, it has very little overlap with an industrial sector-focused ETF such as the Industrial Select Sector SPDR fund (XLI).

Complements ESG Funds

Although Chanin doesn’t consider FIXT an environmental, social and governance fund, it could be considered a complement to other ESG holdings. He says some the companies listed are infrastructure companies such as power-management firm Eaton and Swiss-based fluid engineering firm Sulzer, which creates products such as submersible pumps.

He noted the fund saw a spike in flows after smoke from the Canadian wildfires severely affected air quality across parts of the eastern Midwest and New England this summer. While some people may not believe climate change is causing more natural disasters, Chanin says that doesn’t matter.

“I think everyone could admit that natural disasters are a major problem that affect people sometimes with some warning, sometimes without any warning,” he says.