State Street Global Advisors has applied to launch an ETF that targets investments that are aligned with requirements of the Paris Climate Accords.
According to a filing with the SEC, the SPDR MSCI USA Climate Paris Aligned ETF intends to list and trade on the Nasdaq.
The fund will generally invest at least 80% of its total assets in the securities comprising the MSCI USA Climate Paris Aligned Index, which is designed to support investors seeking to reduce their exposure to transition and physical climate risks and who wish to pursue opportunities arising from the transition to a lower-carbon economy while aligning with the Paris Agreement requirements.
The index consists of U.S. large- and mid-cap companies and is designed to exceed the minimum standards of a “Paris Aligned Benchmark” under the European Union’s Low Carbon Benchmark Regulation. A Paris-Aligned Benchmark is designed to align with a principal objective of the Paris Agreement to limit the increase in the global average temperature to well below 2 degrees Celsius (preferably 1.5 degrees Celsius) above pre-industrial levels.
The index selects its constituents from the MSCI USA Index, which is screened to exclude the following:
- Companies producing cluster bombs, landmines, depleted uranium, chemical or biological weapons, blinding laser weapons, non-detectable fragments, or incendiary weapons; producing key components of cluster bombs, landmines, depleted uranium weapons, or chemical or biological weapons; owning 20% or more (50% for financial companies) of a weapons or components producer; or that are 50% or more owned by a company involved in weapons or components production.
- Companies assigned an MSCI ESG Controversy Score of 0.
- Companies that produce tobacco or derive 5% or more aggregate revenue from the production, distribution, retail, and supply of tobacco-related products.
- Companies assigned an MSCI Environmental Controversy Score of 0 or 1.
- Companies deriving 1% or more revenue from mining of thermal coal and its sale to external parties (excluding all revenue from metallurgical coal, coal mined for internal power generation, intra-company sales of mined thermal coal, and coal trading).
- Companies deriving 10% or more revenue from oil and gas related activities, including distribution and retail, equipment and services, extraction and production, petrochemicals, pipelines and transportation, and refining (excluding biofuel production and sales and trading activities).
- Companies deriving 50% or more revenue from thermal coal-based, liquid fuel-based and natural gas-based power generation.
The application of this new ETF follows State Street Global Advisors launching three new ESG-focused ETFs on the New York Stock Exchange in January: the SPDR S&P SmallCap 600 ESG ETF (ESIX), the SPDR Bloomberg SASB Developed Markets Ex US ESG Select ETF (RDMX), and the SPDR Bloomberg SASB Emerging Markets ESG Select ETF (REMG).
Developed to provide exposure to small-cap, international, and emerging market equities, respectively, that exhibit certain environmental, social, and governance characteristics, these SPDR ETFs are designed to help investors reinforce core allocations and incorporate ESG considerations into their portfolios.
SPDR’s suite of U.S.-listed ESG ETFs is currently 11 SPDR ETFs with more than $3.1 billion in assets. State Street Global Advisors’ ESG ETFs brought in $985 million in inflows in 2021.
For more information on the SPDR ETF suite, visit www.ssga.com/etfs.
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