The exponential growth of the population of environmental, social, and governance (ESG) funds in recent years is a driving force behind the development and introduction of products that focus on a single ESG concept. While those products run the gamut of various points of emphasis and strategies, climate is one of the most popular because it’s appealing to a broad swath of market participants and relatively easy to implement at the fund level. Although “climate” isn’t mentioned in the name of the IQ Cleaner Transport ETF (CLNR), the fund is worthy of consideration in the climate exchange traded fund conversation.
The reason is simple: Transportation is one of the most efficient avenues through which corporations and governments can make strides toward fighting climate change. Fund issuers are meeting demand for climate-related products, through both mutual funds and ETFs.
“The number of mutual funds and exchange-traded funds with a climate-related mandate increased by 32% so far this year, reaching 1,140 globally at the end of September,” according to a new Morningstar report. “This growth stemmed from continued strong product development as investors seek new approaches to manage climate risks in portfolios, take advantage of opportunities arising from the transition, and contribute to the reduction of real-world carbon emissions.”
Regarding investment opportunities tied to the carbon reduction theme, this is a space currently occupied by a variety of ETFs with room for industry-focused products such as CLNR.
CLNR, which supports the National Wildlife Foundation’s initiatives, has surprising breadth, meaning that despite what the fund’s name implies, it’s not solely original equipment manufacturers (OEMs) in the electric vehicle space. Rather, CLNR’s member firms hail from a variety of industries, positioning the ETF to potentially benefit from more climate-driven investment segments beyond electric vehicles. It could be fair to classify CLNR as a climate-conscious fund.
“Climate-conscious funds select or tilt toward companies that consider climate change in their business strategy and therefore are better prepared for the transition to a low-carbon economy. Climateconscious funds tend to invest in a mix of companies: those that positively align with the transition and those that provide climate solutions,” added Morningstar.
CLNR has another advantage: It’s over a year old and resides in an ETF segment full of rookie funds. Some investors may opt for the more seasoned option.
“Strong flows into climate-conscious funds were also accompanied by rapid product development, with 54 new offerings and 47 repurposed funds debuting so far this year. Climate-conscious funds represented more than half of new climate fund launches in Europe,” concluded Morningstar.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.