As the industrialization of China’s economy continues to advance, Beijing is taking steps to clean up a growing pollution problem, opening up a opportunity for investors looking to capitalize on the efforts through a new KraneShares ETF that specifically targets Chinese companies focused on environmental sustainability.
On Friday, KraneShares added the KraneShares MSCI China Environment Index ETF (NYSEArca: KGRN), which has a 0.79% expense ratio.
The new ETF tries to reflect the performance of the MSCI China IMI Environment 25/50 Index, which is comprised of Chinese companies focused on contributing to a more environmentally sustainable economy by making efficient use of scarce natural resources or by mitigating the impact of environmental degradation, according to a prospectus sheet.
The company components found in the underlying index may be categorized under five different themes, including alternative energy, sustainable water, green building, pollution prevention and energy efficiency.
Due to China’s quick industrialization and economic expansion, the emerging country has see pollution levels surge.
“China’s rapid economic development has impacted the environment. Levels of air and water pollution in China are much higher than those recommended by the World Health Organization,” according to KraneShares note.
Consequently, more Chinese cities have taken action to reduce the pollution.
“China is outpacing other world leaders in growth of electric power capacity from renewable technologies,” KraneShares said.
Related: A Cheap Way for Bond ETF Investors to Diversify
China is the world leader in total renewable energy capacity at 28% of total global capacity. Beijing is expected to spend $360 billion on renewable energy and achieve 50% commercial green building certification by 2020, which would create as much new renewable energy as the entire U.S. electricity system.
“China has a proven track record of achieving ambitious long term renewable energy goals set forth within The Five Year Plan,” according to KraneShares.
KGRN’s sector weights include consumer discretionary 8.3%, real estate 27.1%, information technology 13.5%, industrials 16.7% and utilities 34.5%.
For more information on new fund products, visit our new ETFs category.