The thinly-populated universe of socially responsible exchange traded funds recently got a boost with the debut of not one , but two ETFs dedicated to the low carbon theme.
The SPDR MSCI ACWI Low Carbon Target ETF (NYSEArca: LOWC) and the iShares MSCI ACWI Low Carbon Target ETF (NYSEArca: CRBN) both debuted last month. Both are off to solid starts. LOWC, the State Street offering, has already hauled in $85.3 million in assets while CRBN, the iShares ETF, has raked in $138.1 million in assets.
CRBN and LOWC each track the MSCI ACWI Low Carbon Target Index, which “is designed to address two dimensions of carbon exposure—carbon emissions and fossil fuel reserves. By overweighting companies with low carbon emissions relative to sales and per dollar of market capitalization, the Index aims to reflect a lower carbon exposure than that of the broad market,” according to State Street.
The quick success of the low carbon ETFs provides a much-needed jolt to socially responsible ETFs, a scuffling segment of the ETF universe.
“But ETFs that track SRI indexes are rare—only 10 exist, with a total of $1.2 billion in assets, according to research firm XTF Inc. The largest is the $417 million iShares MSCI KLD 400 Social ETF (NYSEArca: DSI), tracking a U.S. index that screens out companies participating in the alcohol, tobacco and gambling businesses and other potentially controversial industries. With a 0.50% expense ratio, the fund had a three-year annualized return of 19.5% as of Dec. 31, according to XTF, compared with 20.2% for the iShares MSCI USA ETF, which tracks a broad index of U.S. stocks,” reports Ari Weinberg for the Wall Street Journal.
Another example of a successful socially responsible ETF is the $305.1 million iShares MSCI USA ESG Select Social Index Fund (NYSEArca: KLD), which is approach its tenth anniversary. [Socially Responsible Investing With ETFs]
While the premise of low carbon investing may seem opaque or too narrowly focused, the reality is the companies found in CRBN and LOWC are already familiar to investors. For example, LOWC’s top 10 holdings include six Dow components along with Apple (NasdaqGS: AAPL) and Wells Fargo (NYSE: WFC). [A New Low Carbon ETF]
Both ETFs were created for the U.N. Joint Staff Pension Fund and each charges 0.2% per year, according to the Journal.
SPDR MSCI ACWI Low Carbon Target ETF Top 10 Holdings
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Apple.
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