Clean Water Initiatives Are Vital for Infrastructure ETFs | ETF Trends

Commodities don’t have the panache of most equities but it’s an opportunity investors can consider when it comes to investing in needs versus wants. In the case of water, something the world obviously needs, clean water initiatives can be vital for exchange-traded funds (ETFs) that focus on infrastructure.

Today’s contentious times amid the pandemic stress the importance of ensuring water resources are untainted. One mechanism for this water is the S&P Global Water Index, which tracks 50 of the largest publicly traded companies involved in water-related business activities.

“As these demands for clean water increase, companies involved in water-related business activities stand to grow in the coming years,” wrote Tianyin Cheng, Senior Director, Strategy and Volatility Indices at S&P Dow Jones Indices. “Allocation to water can be systematically captured by rules-based, transparent index construction. Market participants could utilize index-linked water strategies to gain exposure to water, manage water risk, express their sustainability views, or allocate as part of a broader natural resource theme.”

^SPGW Chart

Back to the pandemic, the focus shifts on the importance of maintaining infrastructure to preserve clean water.

“The COVID-19 pandemic has not only disrupted the social and economic realities of our communities, but also undermined some of the basic infrastructure we depend on,” a Brookings Institution article noted. “Our water infrastructure has been at the heart of this realization; its importance to health, hygiene, and safety has never been more obvious, yet millions of disadvantaged and vulnerable households still lack reliable and affordable access to water.”

Show Me the Munis

One fund to focus on is the Xtrackers Municipal Infrastructure Revenue Bond ETF (RVNU). RVNU seeks investment results that correspond generally to the performance of the Solactive Municipal Infrastructure Revenue Bond Index that’s comprised of tax-exempt municipal securities issued by states, cities, counties, districts, their respective agencies, and other tax-exempt issuers.

RVNU YTD Performance

In addition, here are a couple more muni bond ETFs to consider:

  1. VanEck Vectors AMT-Free Long Municipal Index ETF (MLN): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Bloomberg Barclays AMT-Free Long Continuous Municipal Index. The index is comprised of publicly traded municipal bonds that cover the U.S. dollar-denominated long-term tax-exempt bond market.
  2. Franklin Liberty Municipal Bond ETF (FLMB):  seeks a high level of current income that is exempt from federal income taxes. Although the fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of the fund’s net assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay interest subject to other federal or state income taxes.

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