Oceans and other bodies of water cover a vast majority of Earth, but a case can be made that investors’ portfolios are too dry when it comes to sustainable ocean investing concepts.
The IQ Clean Oceans ETF (OCEN) is a prime example of an exchange traded fund that provides investors with efficient exposure to a nascent but increasingly important concept. OCEN, which turns a year old later this month, follows the IQ Clean Oceans Index and is home to 80 companies that look to safeguard oceans through pollution reduction and improve allocation of natural resources.
While many investors aren’t yet aware of the potential potency of the ocean investing thesis, it is credible and vast.
“The oceans’ contributions are well known – food, oxygen, transportation, recreation, heat absorption and more. Unfortunately, the oceans face severe challenges and the price tag to address them is jaw-dropping: according to one 2020 study, $174.5 billion is needed per year until 2030 to achieve the goals of the UN’s SDG 14, Life Below Water,” noted the World Economic Forum (WEF).
As is the case with renewable energy — though many investors are not yet aware of this fact — governments the world over are showing financial commitment to bolstering ocean protection. Those expenditures could boost the long-term appeal of OCEN.
“While governments, multilateral development banks, NGOs and philanthropists are boosting their commitments, the funding task remains daunting. Thankfully, market-based opportunities are emerging to help close the gap, with offerings across the blue economy – these include aquaculture and fisheries, marine renewable energy, ports and transportation, pollution management, ocean technology, and tourism,” added the WEF.
Another point in favor of OCEN is the ETF’s utility. It checks both the environmental, social, and governance (ESG) and sustainable investing boxes. That’s an important point because as more advisors and investors are learning, ESG and sustainability are different concepts.
“Environmental, social and governance (ESG) initiatives have been criticized for inadequate data, low ratings correlations, lack of transparency and greenwashing… the list goes on. But acronyms aside, investor focus on ESG factors is here to stay – and ESG remains a tool to draw attention to the right questions,” concluded the WEF.
OCEN allocates over 51% of its weight to technology and industrial stocks, while the materials and utilities sectors combine for 28.7% of the fund’s roster, according to issuer data.
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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.