If I had $1,000 to invest into a green exchange-traded fund (ETF), I know the one I’d pick.
Whilst I am a big fan of BetaShares Global Sustainability Leaders ETF (ASX: ETHI), it’s actually BetaShares Climate Change Innovation ETF (ASX: ERTH) that I’m going to cover in this article.
What is ERTH ETF?
The idea behind this investment is that it’s a portfolio of up to 100 leading global companies that derive at least 50% of their revenues from products and services that help to address climate change and other environmental problems through the reduction or avoidance of CO2 emissions.
If you’re wondering what type of sectors this investment covers, it’s invested in clean energy providers, along with leading companies tackling green transport, waste management, sustainable product development, improved energy efficiency and storage, energy efficiency technologies, sustainable food, water efficiency and pollution control.
What shares does it own?
Readers might recognise some of the largest 10 positions in the portfolio.
Those names include: DocuSign, Trane Technologies, Zoom Video Communications, Cie De Saint-Gobain, Infineon Technologies, Nio, Tesla, East Japan Railway, Vestas Wind Systems and Xpeng.
At the moment there is a total of 97 positions in the portfolio.
Looking at the sector allocation, there is a lot of diversification across different industries. These are the ones with weightings of more than 5%: building products (16.5%), automobile manufacturers (11.4%), semiconductors (8.2%), application software (8%), heavy electrical equipment (6.8%), electrical components & equipment (6%) and semiconductor equipment (5.9%).
I also think it’s well-diversified when it comes to the country allocation. Only 39% of the portfolio is invested in the US. The rest of the main allocations are to Asia and Europe: China (9.6%), France (8.9%), Germany (8.5%), Britain (5.2%), Japan (4.3%), Taiwan (3.8%), Denmark (3.3%) and Sweden (2.7%).
Why I think the ERTH ETF is a good option
The annual management fee is 0.65%, which is a very reasonable cost in my opinion, for the type of investment it is.
The index that this ETF tracks has done very well. Over the last three years that index has produced an average return per year of 34%. I wouldn’t expect that type of return over the next three years.
The Energy Transitions Committee (ETC) has estimated that there will need to be an additional investment of US$1 trillion to US$2 trillion per annum to achieve a zero carbon emissions economy. This could benefit a lot of the companies that are focused on improving the world with greener products and services.
