Sydney-based BetaShares has unveiled its latest ETF, a pure-play strategy targeting companies at the forefront of the fight against climate change.
The fund targets companies providing innovative solutions to tackle climate change.
The BetaShares Climate Change Innovation ETF (ERTH AU) has listed on the Australian Securities Exchange and comes with an expense ratio of 0.65%.
The fund is linked to the Solactive Climate Change and Environmental Opportunities Index which selects its constituents from developed and select emerging market exchanges, notably excluding mainland China.
Eligible firms must have market capitalizations above $200 million.
The index harnesses insights from iClima Earth, a London-based research firm focused on environmental impact investing, to screen for companies offering innovative solutions enabling CO2 emissions avoidance.
To achieve this, iClima Earth first identifies companies that fit into one of five sustainability sub-sectors – green energy, green transportation, water and waste improvements, enabling solutions, and sustainable products.
To focus on pure-play climate innovators, the methodology also screens for firms that derive at least 50% (40% for current index constituents) of their total revenue from products and services that enable at least one of four defined sources of CO2 emissions avoidance – direct reduction of emissions from fossil fuel burning, renewable energy generation, energy savings enabling, and carbon sequestration.
The 100 largest eligible companies form the final composition. To safeguard the index’s ESG profile, any company with meaningful exposure to armaments, nuclear energy, oil, coal, natural gas, fossil fuels, alcohol, adult entertainment, gambling, and tobacco is passed over in favour of the next eligible security.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 4% on any individual stock. The index is rebalanced on a semi-annual basis with buffer rules helping to limit unnecessary turnover.
According to iClima Earth, the index captures a wide spectrum of climate change solutions with exposure to alternative fuel cells, energy storage, green finance, renewable energy assets and developers, smart grids, electric transportation, ride-sharing, pollution control, recycling centres, food solutions, and sustainable materials, buildings and forestry, among many others.
Stocks from the US dominate with a combined weight of 42.9% with the next-largest country exposures being Germany (8.2%), France (7.9%), Ireland (7.4%), and the UK (5.1%).
A third (32.7%) of the index is dedicated to stocks from the capital goods industry, followed by companies from the semiconductor (15.7%), automobile (13.6%), software (8.4%), and utility (6.8%) sectors.
Notable positions include Trane Technologies (4.8%), Infineon Technologies (4.5%), Zoom Video Communications (4.4%), Saint-Gobain (4.3%), DocuSign (4.1%), Tesla (4.0%), NIO (4.0%), East Japan Railway (3.6%), Vestas Wind Systems (3.3%), and Plug Power (2.9%).
European investors can access a similar strategy through the iClima Global Decarbonisation Enablers UCITS ETF (CLMA LN) which was brought to market at the end of last year through a collaboration between iClima Earth and white-label ETF platform HANetf.
CLMA tracks the iClima Global Decarbonisation Enablers Index which utilizes a lower eligibility threshold of 20% for revenue derived from CO2 emissions avoidance, leading to enhanced diversification but lower pure-play exposure. It also comes with an expense ratio of 0.65%.