February saw the birth of a new ETF called Transform Climate ETF (CBOE: NETZ) and it’s issuers from Engine No.1 say its filter for selection is how companies combine their profits with tangible environmental actions.
Among the more popular names incuded in the ETF are EV makers Tesla and Rivian but the largest weight is given to some surprising names not many people associate with climate-focused investments.
General Motors, Ford, Alcoa and Occidental Petroleum are among the top holdings for NETZ. Engine No. 1 founder Chris James explains this by saying: “While most climate-focused funds avoid so-called ‘brown’ legacy companies, we believe there is no way to decarbonize the planet without these companies transforming, and there is no time to lose.”
In a recent interview with CNBC, CEO Jennifer Grancio added that the companies that have made the cut have shown that they are “on the right path” to changing their operations and reducing their carbon footprint.
According to her, the companies in the NETZ ETF are already positioning themselves to make the most of what she describes as a “$4-5 trillion opportunity” when it comes to climate investing.
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Grancion commented on the matter by saying: “We think that Exxon has a little bit left to go in disclosing their (climate) targets.”
Engine No. 1 utilises their own proprietary “Total Value Framework” to evaluate companies with a data-led approach that assigns values to the environmental impact, as well as its ability and potential to create value.
One notable company that’s value framework didn’t make the cut is ExxonMobil (NYSE: XOM).
Given that Engine No.1 managed to secure three seats on the board of Exxon last year in a drive to push the oil producer in a more climate-friendly direction, some might have expected it to have a guaranteed spot.
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The head of ETF’s at Engine No. 1 Yasmin Bilger added that: “As investors, we can’t just invest in young tech companies that aim to tackle climate change over a longer time horizon, we need to own and engage with the companies whose transformation will drive change now at scale.”
This is investment firm Engine No. 1’s second impact ETF after VOTE (CBOE: VOTE) which was launched in June, 2021. But unlike VOTE’s expense ratio of 0.05%, NETZ is at a loftier 0.75%.