The World Bank has called for ethical and low-carbon investing, which has put part of its staff pension in hot waters, and those who would like to invest toward a better tomorrow have a few socially responsible exchange traded fund options available.
The World Bank is catching flak after the its treasurer said about 40% of its fund’s equity holdings are invested in companies in industries associated with environmental and health problems, Reuters reported.
The Bank has called on others to shift away from fossil fuel-related companies. World Bank President Jim Young Kim has asked long-term investors “to recognize their fiduciary responsibility” to reveal their exposure to climate change-related impacts.
Specifically, investors seeking to invest in companies that have a smaller impact on the global environment typically follow characteristics described under sound environmental, social and governance, or ESG, principles.
For instance, retail investors interested in ESG investments can take a look at the SPDR MSCI ACWI Low Carbon Target ETF (NYSEArca: LOWC) and the iShares MSCI ACWI Low Carbon Target ETF (NYSEArca: CRBN) for more socially responsible strategies.
LOWC and CRBN both target the MSCI ACWI Low Carbon Target Index, which tries to address carbon exposure by overweighting companies with low carbon emissions relative to sales and per dollar of market capitalization, compared to the broader market. Many of the component stocks are familiar names, including Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT), Johnson & Johnson (NYSE: JNJ) and General Electric (NYSE: GE).
While the World Bank’s pension may be thinking about adding ESG investments into its portfolios, both LOWC and CRBN were created for the United Nations Joint Staff Pension Fund. LOWC has $93.2 million in assets under management and CRBN has $151.1 million. [New ETF is a Low Carbon Initiative]
“Just two years ago, investments that met ESG principles were the domain of smaller funds; now interest has spread to the largest pension schemes in the world,” Kevin Bourne, a managing director of ESG at the FTSE Group, said in the Reuters article.
The strategies have also been outperforming the broader iShares MSCI ACWI ETF (NasdaqGM: ACWI), which tracks the benchmark MSCI All-Country World Index. CRBN has increased 4.5% over the past month and 8.3% over the last three months while ACWI rose 3.5% over the past month and 7.9% over the last three months.
For more information on socially responsible investments, visit our socially responsible ETFs category.
Max Chen contributed to this article.