More investors are moving towards ethical investments. Exchange traded funds (ETFs) like Betashares Climate Change Innovation ETF (ASX: ERTH) are drawing a lot of attention. Here are three top questions answered on the ERTH ETF.
What is ERTH ETF?
The ERTH ETF holds a portfolio of up to 100 leading global companies that have at least 50% of their revenues from products and services that help address climate change and other environmental problems.
These companies are either reducing or avoiding CO2 emissions. Some of the types of companies in the portfolio are clean energy providers, companies tackling green transport, waste management, sustainable product development and sustainable food.
Since the ERTH ETF launched in March 2021 it has returned 6.66%. However when looking at the index it tracks it would have returned an average of around 36% per year over the last three years, if the ETF had existed in that three years.
What index does ERTH track?
ERTH tracks the Solactive Climate Change and Environmental Opportunities Index. It is a global index that only includes companies that are “expected to have a positive climate change and environmental impact”.
Solactive outlined the specific sectors in the index as green energy, green transportation, water & waste improvements, enabling solutions and sustainable products.
It is a worldwide index, therefore the ERTH ETF gives investors international exposure. The top three countries are US with 47.2% of the portfolio based there, China with 9.2% and Germany with 7.7%.
Some of the top holdings are Tesla Inc, Infineon Technologies, Vestas Wind Systems, Ecolab and DocuSign.
Is ERTH a good ETF?
What one investor thinks is good, another might find it isn’t something they would choose. So the answer is really in the eye of the beholder.
However, I can share what my thoughts are:
There has been a lot of hype around climate change and ethical shares in recent times, which has undoubtedly driven some share prices higher. As an example, the Australian Ethical Investment Limited (ASX: AEF) share price has gone up by a huge 143% in one year.
Most of the businesses in this ETF are leading the charge for a greener world. According to the Australian Financial Review, Citi reckons that the world needs to invest $6.8 trillion a year for the energy transition.
It’s a fair assumption to think that plenty of the shares in this ETF can do well in that, as investor attitudes continue to shift and the world focuses on net zero carbon targets.
