Investors looking to focus on the virtues of environmentally sound investing have a growing number of exchange traded funds to consider. The SPDR S&P 500 Fossil Fuel Free ETF (SPYX), which debuted in 2015, is one of the more seasoned options in that category.
The $354.52 million SPYX tracks the S&P 500 Fossil Fuel Free Index and as its name implies, the fund is significantly underweight traditional energy stocks relative to standard broad market equity benchmarks.
SPYX “seeks to allow climate change-conscious investors to align the core of their investment strategy with their values by eliminating companies that own fossil fuel reserves from the S&P 500,” according to State Street.
“State Street Global Advisors offers three fossil-fuel-free ETFs that focus on U.S. large-cap, non-U.S. developed-markets, and emerging-markets stocks,” said Morningstar in a recent note. “SPDR S&P 500 Fossil Fuel Reserve Free ETF SPYX has the longest track record, launched in late 2015. Its 12% three-year annualized return through May ranks in the best decile of the large-blend Morningstar Category. Its expense ratio is 0.2%.”
Another Idea: The S&P 500 Ex-Energy ETF
A rival to SPYX is the S&P 500 Ex-Energy ETF (NYSEArca: SPXE), which provides exposure to S&P 500 companies with the exception of those included in the energy patch.
“An investment in the S&P 500 that excludes a particular sector gives you the flexibility to tailor your core U.S. equity exposure,” according to ProShares. “It can replace a traditional S&P 500 fund, allowing you to underweight or even eliminate a sector in your portfolio.”
During times the energy sector has struggled, SPXE has outperformed that sector and the S&P 500. Investors looking for broad small-cap exposure while avoiding energy stocks may want to consider the Nuveen ESG Small-Cap ETF (CBOE: NUSC).
NUSC “has barely half the category average exposure to fossil fuels and none of it in actual fossil-fuel reserves (so it is fossil-fuel-reserve-free). Launched in late 2016, NUSC charges 0.4% and so far, so good on performance: Its 6.9% two-year annualized return through May ranks in the top decile of the small-blend category,” according to Morningstar.
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