Invesco’s climate transition ETF may be worth consideration as investors look to bolster their portfolios.
Invesco debuted the Invesco MSCI Global Climate 500 ETF (KLMT) last month. KLMT holds companies that have a track record of reducing greenhouse gas and carbon emissions. The fund offers a precise strategy for investors prioritizing the climate transition at just ten basis points.
Notably, Invesco’s new climate transition ETF launched with significant funding from Varma, as the Finnish pension insurer made an initial investment of $1.6 billion in KLMT. The substantial funding from Varma demonstrates a commitment to KLMT, ensuring its initial liquidity and market credibility.
Under the Hood of Invesco’s New Climate ETF
KLMT could benefit investors looking for a lower-fee climate-transition ETF that tracks an MSCI benchmark, Rene Reyna, head of thematic ETF strategy at Invesco, said in a statement to VettaFi.
The Invesco ETF offers a broad, marketwide strategy. Therefore, the fund may pair well with other clean energy exposures like water conservation and solar energy, which have a more focused approach.
KLMT’s underlying index uses optimization to aim for lower tracking errors compared to the MSCI ACWI. The fund also uses a more streamlined approach compared to the benchmark, owning 500 names instead of over 2,000.
The KLMT index also focuses on Scope 1 and 2 emissions only, prioritizing the quality of current data versus the completeness of emissions along the entire supply chain of each company (which can increase complexity), according to Reyna.
The fund offers global exposure. The top country exposure by weight is the U.S., trailed by Japan, the United Kingdom, Canada, and France, according to ETF Database.
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