Investors poured nearly $97 billion of net new money into global sustainable funds in the first quarter of 2022, according to Morningstar data, bringing total sustainable assets to $2.77 trillion. But despite the launch of 227 new sustainable funds during the first quarter alone, few go beyond an exclusionary approach to make a real impact.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
Invest in a Healthy Ocean
Newday Impact is an impact manager that provides a range of funds for socially-responsible investors. While most ESG funds only screen companies, the asset manager invests intending to generate a positive environmental or social change. In addition, Newday Impact donates 5% of its net revenue to these causes.
Newday’s newly launched Ocean Health ETF (AHOY) invests in industry-leading companies contributing to ocean health. The managers seek companies concerned with and attentive to CO2 emissions, end-of-lifecycle product waste, and discharge into bodies of water and companies committed to environmental protectionism.
In addition, the fund managers use fundamental analysis to identify securities and construct the portfolio with its highest conviction ideas. The fund’s portfolio holds about 90% U.S. and 10% international equities with a large-cap blend focus. With an average P/E ratio of about 16x, the fund’s holdings are undervalued relative to the 22x category average.
The fund’s most significant holdings include:
- Tetra Tech Inc. (TTEK)
- Austevoll Seafood ASA (AUSS)
- Clean Harbors Inc. (CLH)
Promote the Net Zero Transition
The Nuveen Global Net-Zero Transition ETF (NTZG) is an actively-managed fund investing in companies that the sub-advisors believe will contribute to the overall transition to a net-zero economy. These include companies following third-party validated carbon reduction plans, committing to carbon reductions, or deploying new climate tech.
Unlike the AHOY ETF, the fund’s portfolio is closer to a conventional portfolio with different weightings. However, it’s overweight in technology, healthcare, utilities, and energy and underweight in basic materials, financial services, and industrials. Meanwhile, the fund’s average P/E multiple is near its category average.
The fund’s most significant holdings include:
- Microsoft Corp. (MSFT)
- Amazon.com Inc. (AMZN)
- Walmart Inc. (WMT)
Other Funds to Consider
Investors seeking broad market exposure with an impact may also want to check out the Engine No. 1 Transform 500 ETF (VOTE), which mimics the S&P 500 index but votes proxies in favor of ESG proposals. The fund successfully installed new board members at Exxon Mobil in the past, creating meaningful change where it matters most.
Other active ESG ETFs include:
- JPMorgan Climate Change Solutions ETF (TEMP) – Invest in public companies providing solutions to address climate change, including sustainable transportation, renewable energy, recycling, and more
. - VanEck Vectors Green Bond ETF (GRNB) – Invest in a portfolio of green bonds that finance over 300 environmentally-friendly projects worldwide with an attractive yield.
The Bottom Line
Global sustainable funds continue to attract capital with various new fund launches every quarter. While most of these funds are simply conventional indexes with an exclusionary screen, many actively-managed funds try to make a more specific and meaningful impact, including the two funds we’ve covered above.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
