Impact asset manager Change Finance is to offset the carbon emissions linked to its $110 million Change Finance US Large Cap Fossil Fuel Free ETF (CHGX US), marking a first for the US ETF market.
The fund is the first US-listed ETF to commit to carbon neutrality.
The fund provides exposure to US large and mid-cap equities, as well as real estate investment trusts (REITs) while using a comprehensive screening process involving more than 50 metrics to exclude companies with poor environmental, social, and governance (ESG) profiles.
The methodology already removes companies operating in the oil, gas, and coal industries, firms that produce or process fossil fuels, and utilities that burn fossil fuels.
It has now gone a step further by committing to sequester 100% of the carbon emissions that its portfolio is responsible for by purchasing carbon offsets.
The fund’s carbon footprint is determined by Scope 1 emissions (direct emissions from a company’s owned or controlled sources) and Scope 2 emissions (indirect emissions from the electricity, steam, heating, and cooling consumed by a company) of each company within the portfolio prorated to the value of the investment.
Change Finance has partnered with Grassroots Carbon, an organization dedicated to removing carbon from the atmosphere and placing it back into the soil through regenerative grazing, the practice of closely managing where and for how long animals forage.
The ETF will pay for the carbon offsets using fees collected from its expense ratio which is 0.49%.
CHGX is the first US-listed ETF to commit to carbon neutrality through the purchase of carbon offsets, a practice that is likely to become more widespread as concerns mount over the global climate crisis.
Andrew Rodriguez, CEO and CIO of Change Finance: “The newest report from the Intergovernmental Panel on Climate Change confirmed what we had feared: it’s too late to stop the next 30 years of climate change, even if the economy was carbon neutral today…That’s why we decided it was time to act. Our hope is to inspire other asset managers to join us.”
Dorrit Lowsen, President and COO of Change Finance, said: “The climate crisis requires full commitment from everyone – especially the financial services industry. We’re proud to have blazed a trail towards net-zero capital markets.”
Carbon-neutral ETFs have already debuted in Europe, courtesy of Purpose Investments and Saturna Capital, both of which have listed products via HANetf’s white-label ETF platform, as well as in Canada from Evolve ETFs.
Several providers of bitcoin-tracking ETPs in both regions are also aligning their products with carbon-neutrality as the hefty power consumption required to conduct transactions on the bitcoin network has increasingly come under scrutiny.