The United Nations Climate Change Conference, known as COP26, is putting carbon reduction and net-zero efforts under the spotlight, and while critics are apt to deride the utility of climate conferences, the fact of the matter is that COP26 is a marquee event that’s highlighting demand for carbon-related investments.
The Goldman Sachs Future Planet Equity ETF (GSFP) is one such investment. In what may be a case of coincidence and good timing, GSFP debuted just a few months in advance of COP26. With the conference bringing net-zero goals further into the mainstream, GSFP could benefit as investors embrace solutions that mesh with their environmental values.
“COP26 will see delegates from up to 197 countries gather to detail how they will achieve the goals of the Paris Agreement to limit global warming to well below 2°C and pursue efforts to limit it to 1.5°C,” according to S&P Dow Jones Indices. “This requires hitting net zero emissions by 2050, meaning the emissions produced by humankind would be balanced by emissions removal.”
Those objectives could carry implications for a variety of ETFs. However, greenwashing is becoming a prominent concern for investors as some issuers liberally apply the ESG label to funds that may ultimately lack those properties.
Those gaffes, which are drawing the ire of investors and regulators alike, actually work in favor GSFP because it’s a prime example of an ETF that has carbon reduction properties and focuses directly on that objective. That’s important because not only does GSFP keep investors away from greenwashing scenarios, it positions them for the long-term nature of this investing category.
“Committing to net zero reduction targets by 2050 may seem like a relatively easy target to agree to, given it’s almost 30 years away—but it isn’t. Long-term targets require short-term milestones. One of the key asks at this year’s COP is that countries come forward with ambitious 2030 emission reductions targets,” adds S&P Dow Jones.
The actively managed GSFP, which is nearly four months old, is already gaining traction with investors, as highlighted by its $84 million in assets under management. The fund charges 0.75% per year, or $75 on a $10,000 investment.
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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.