By Ellen Kennedy
From Kiplinger’s Personal Finance
Like all investors, those who are focused on sustainability are looking for ways to hedge inflation and deliver long-term value in today’s economy.
Two new exchange-traded funds stand out—the first by providing active management in the often-overlooked specialty of ocean health, and the second by investing in futures contracts on commodities, natural gas, and carbon credits tied to the transition to alternative energy sources.
Investing in Clean Oceans
Our oceans are in trouble. Overfishing, plastic pollution, and climate change decimate sea life and jeopardize the livelihoods of millions globally. Enter Newday Impact Investing, which launched the Ocean Health ETF (Symbol AHOY) in June. The ETF will invest at least 80 percent of its assets in firms that further ocean health. The ETF’s active management may weather a volatile market better than an index fund might. And the Ocean Health ETF has reasonable annual expenses of 0.75 percent.
Newday constructs the portfolio from a broad range of global stocks that it identifies as “ocean health companies.” Such companies avoid or address problems such as overfishing, water pollution, and carbon emissions. Newday then homes in on fundamentals such as earnings expectations and profitability measures to select 40 to 60 stocks for the portfolio. Top holdings include Apple, Alphabet, and Microsoft—included in many ESG funds for their lower carbon emissions.
You’ll also find firms such as Clean Harbors, a U.S. waste management and recycling company whose maritime division cleans marine oil spills and decommissions shipyards. Companies that help clean up or transition away from fossil fuels may benefit from stricter environmental regulations and increased infrastructure spending.
The fund will donate 5 percent of its net revenue to EarthEcho International, a nonprofit that promotes youth leadership for ocean sustainability. Family members of the late Jacques Cousteau, the famed undersea explorer, are involved in EarthEcho leadership and programs.
A Greener Commodities Play
Harbor Capital Advisors and partner Quantix Commodities recently launched an ETF designed to benefit from strong commodities demand and the decarbonization trend. Harbor Energy Transition Strategy ETF (RENW) selects investments that fit into one of three categories: commodities essential for the new energy infrastructure (for example, copper, nickel, and silver); futures contracts on natural gas and other bridge fuels; and carbon credits, which let companies that exceed their carbon allowance purchase emissions rights from companies that are under their allotment.
The ETF tracks the performance of the Quantix Energy Transition index, and charges 0.80 percent in fees. Unlike some commodity ETFs, it requires no K-1 tax-filing forms.
Investors often flock to commodities as inflation drives up the price of raw materials. Don Casturo, chief investment officer of Quantix, believes a commodity-based approach is better than buying stocks for capitalizing on the energy transition. It’s hard to know which firms will ultimately harness the winning alternative energy technologies, he says, but the transition will require the same basic metal and mineral commodities. “There’s only one periodic table,” says Casturo.
(Ellen Kennedy is associate ESG investing editor at Kiplinger.com. For more on this and similar money topics, visit Kiplinger.com.)
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