Socially responsible investing and the corresponding exchange-traded funds have, over time, notched mixed records of success. However, with investors and news observers hearing so much about global climate change in recent years, the time could be right for an ETF focusing on that specific theme.
Enter the Etho Climate Leadership U.S. ETF (NYSE: ETHO). ETHO is the first broad based, diversified, socially responsible and fossil-free exchange-traded fund that does not have exposure to the energy sector, according to a statement.
A Look Into ETHO
The new ETF, which holds nearly 400 stocks, is based on the Etho Climate Leadership Index (ECLI), an index that was announced in October and is completely divested of fossil fuel companies, rigorously screened for ESG criteria and composed of 400 of the most climate-efficient companies across sectors, according to the statement.
No stock accounts for more than 0.61 percent of the new ETF's weight. Top 10 holdings in ETHO include Netflix, Inc. (NASDAQ:NFLX), M&T Bank Corporation (NYSE:MTB) and Global Payments Inc (NYSE:GPN).
Entrance Of ETHO
ETHO comes to market at a time when some institutional investors are dumping stakes in fossil fuels companies and some younger investors have said they are committed to eschewing traditional energy producers in their portfolios.
In September, it was announced that institutions and individuals representing more than $2.6 trillion in assets under management are committed to fossil fuel divestment. This number is likely to grow, as 84 percent of Millennials say they favor ESG investing, and roughly $41 trillion will pass to Millennials from baby boomers over the next 35 years. Further pointing to the growing trend of socially responsible investing, $59 trillion has been committed to the U.N.'s Principles of Responsible Investing through more than 1,300 signatories, according to the Etho Capital statement.
In evaluating companies, Etho Capital uses a four-part screen that includes quantitative climate leader selection, removing fossil fuels producers, an environmental and social governance (ESG) screen and an expert and stakeholder ESG screen.
ETHO's annual fee is 0.75 percent, or $75 per $10,000 invested.
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