New ESG Fund from Engine No. 1 Leans on Activism
The Engine No. 1 Transform Climate ETF (NETZ) offers an approach to sustainable investing that includes – wait for it – oil and gas companies.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
The managers behind the recently launched Engine No. 1 Transform Climate ETF (NETZ) focus on U.S. stocks that will drive the transition to decarbonize the economy. But they aren’t above working with polluters.
That’s part of their DNA.
Engine No. 1, the exchange-traded fund’s adviser, is a relative newcomer to environmental, social and governance (ESG) investing and advocacy. But last year, it helped to force the replacement of three members of Exxon Mobil’s (XOM) board with directors committed to addressing the company’s climate risks.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Transform Climate ETF will use a similar strategy of active engagement, working as a shareholder advocate to get companies to make their operations greener. But there’s a twist: This new ETF invests in the industries that are most in need of decarbonization, including agriculture, transportation and energy.
“You can’t solve a problem by running away from it,” says Engine No. 1’s head of ETFs, Yasmin Dahya Bilger. “Most climate strategies are built on the concept of divestment. They screen away bad actors, typically companies with the highest emissions. So ESG funds will often be underweight in oil and gas, auto, and agribusiness industries. Those three sectors alone represent 70% of greenhouse gas emissions.”
By investing in and engaging with companies in those sectors that have nevertheless set a clear path to decarbonizing their businesses, Engine No. 1 hopes to help the world move closer to net zero, when carbon emissions are balanced by absorption.
That said, you might be surprised by what’s inside the portfolio.
An Active, Activist Strategy
Among the fund’s 21 stocks are ESG standard-bearers First Solar (FSLR) and Tesla (TSLA). But the fund also holds several funds that are far from it, including General Motors (GM) and oil and gas giants Occidental Petroleum (OXY) and Shell (SHEL).
These firms bring fat wallets that can fund change in ways that pure-play startups often cannot, says Dahya Bilger. GM, for example, has pledged to invest $35 billion to sell 100% electric vehicles by 2035 and has made early investments in battery technology.
What’s more, some of these companies are greener than they seem. Shell wins a double-A rating from MSCI – the financial data firm’s second-highest sustainable grade – in part because it manages toxic waste better than peers.
Others are working hard to lessen their environmental impact. Occidental has been investing heavily in experimental climate-change-busting technologies, such as carbon capture, says Dahya Bilger. The company plans to break ground later this year on a facility that will suck carbon dioxide out of the atmosphere in the Permian Basin, the most productive oil field in the country. The carbon dioxide is then stored and some of it is put to use in other products, such as low-carbon fuels and building materials.
The fund’s unique approach skews it toward sectors that often get little play in other ESG funds. Industrials and materials, for instance, are the biggest sectors in Transform Climate ETF. By contrast, the top sectors in the typical U.S.-stock ESG fund are technology and financials.
That might make the fund appealing to investors as a complement to traditional ESG strategies.
It’s early days, but Transform Climate ETF has lost 0.9% since its early-February launch through May 6. That’s better than the 9.8% decline in the S&P 500 and the 11.3% average drop in the typical U.S. ESG stock fund.
-
Dow Adds 1,206 Points to Top 50,000: Stock Market TodayThe S&P 500 and Nasdaq also had strong finishes to a volatile week, with beaten-down tech stocks outperforming.
-
Ask the Tax Editor: Federal Income Tax DeductionsAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on federal income tax deductions
-
States With No-Fault Car Insurance Laws (and How No-Fault Car Insurance Works)A breakdown of the confusing rules around no-fault car insurance in every state where it exists.
-
Stock Market Today: Stocks Gain Ahead of Fed MeetingExxon Mobil (XOM) and General Motors (GM) both popped after reporting solid earnings.
-
The 5 Best Actively Managed Fidelity Funds to Buy and Holdmutual funds Sometimes it's best to leave the driving to the pros – and these actively managed Fidelity funds do just that, at low costs to boot.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
