Specialist thematic issuer Rize ETF has unveiled a new ETF providing exposure to companies developing innovative solutions to the world’s environmental challenges.
Rahul Bhushan and Stuart Forbes, co-founders and directors of Rize ETF.
The Rize Environmental Impact 100 UCITS ETF has been listed on London Stock Exchange in US dollars (LIFE LN) and pound sterling (LVNG LN) and on Xetra in euros (WRLD GY).
It is due to be rolled out on Borsa Italiana in euros (LIFE IM) and SIX Swiss Exchange in Swiss francs (ENVR SE) in the coming days.
The fund tracks the Foxberry SMS Environmental Impact 100 Index which was developed through a partnership between Rize, index administrator Foxberry, and independent ESG intelligence firm Sustainable Market Strategies (SMS).
The index selects its constituents from a universe of developed market stocks with market capitalizations greater than $250 million and average daily trading values above $1m.
The underlying methodology is designed to target companies with operations aligned to the six environmental objectives set out in the EU Taxonomy for Sustainable Activities, a part of the EU’s Sustainable Finance Disclosure Regulation (SFDR).
The six environmental objectives include climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems.
The index harnesses SMS’s proprietary classification methodology to deconstruct the six environmental objectives into a series of high impact investment sub-sectors including clean water, energy efficiency solutions, circular economy solutions, renewable energy equipment manufacturers, renewable energy generation, electric vehicles and green transport, pollution control, nature-based solutions, hydrogen and alternative fuels, and climate resilience solutions.
Firms must derive at least 50% of their revenue from their relevant sub-sector to remain eligible for the index.
Companies are then assigned ‘Environmental Impact Scores’ which comprise a forward-looking assessment of the impact potential for the sub-sector in solving key environmental challenges, the potential success of the sub-sector taking into account technological and financial considerations, and the individual company’s positioning within the sub-sector and its potential to emerge as a leader in the coming years.
The index selects the 100 stocks with the highest Environmental Impact Scores, weighting them by their score subject to liquidity constraints. Reconstitution and rebalancing occur semi-annually.
Stocks from the US account for 40% of the index by weight, with Japan, Canada, South Korea, and France making up the next-largest country exposures with aggregate weights of between 4% and 7% each. The index is well diversified at the stock level with the largest constituent accounting for a weight of just 1.5%.
The fund comes with an expense ratio of 0.55% and is classified as Article 9 under SFDR.
Rahul Bhushan, co-Founder and Director of Rize ETF and investment strategies lead, commented: “What we have created here in partnership with SMS is an investment strategy and ETF that is purpose-built for taxonomy-aligned portfolios. LIFE is a simple and transparent way for investors to align themselves to the six environmental objectives set out in the EU Taxonomy with the knowledge that their capital is being used to back the technologies and solutions that will pave the way to a greener future.“
Stuart Forbes, co-Founder and Director of Rize ETF and product lead, added: “Our planet is under threat like never before, and we need to take collective action now. That requires us to put our hands into our pockets and vote with our capital. The Rize Environmental Impact 100 UCITS ETF is designed to give investors exposure to the top 100 most impactful companies in the environmental universe while also providing them the comfort that their capital is being geared towards maximising environmental sustainability in each of our relevant sub-sectors.”
Félix Boudreault, Managing Partner at Sustainable Market Strategies, said: “We are very pleased to be working with Rize ETF to bring our extensive experience in environmental public policy and sustainable investment research to bear in this ground-breaking initiative in Europe. With the proliferation of greenwashing that unfortunately pervades our industry, we were together determined to develop a robust investible solution that cut through the noise. We have created an ETF that does not just focus on carbon avoidance, or carbon mitigation, but one which seeks to identify the companies that are leaders and innovators in their respective environmental sub-sectors as per the EU Taxonomy.”
The launch brings Rize ETF’s total fund count to five, complementing existing thematic offerings on sustainable food, cybersecurity, medical cannabis, and education technology.