As 150 world leaders gathered near Paris at the United Nations Conference on Climate Change with an aim to limit rising global temperatures to no more than 2 degrees celsius above pre-industrial levels, State Street Corporation’s STT asset management unit – State Street Global Advisors – also made an effort by launching its first fossil-fuel free exchange-traded fund (“ETF”).
The SPDR S&P 500 Fossil Fuel Free ETF started trading on the NYSE Arca. The new ETF will help investors remove fossil fuel reserves from their portfolio while maintaining exposure to the core of the S&P 500 Index.
The move comes as climate activists persuade investors to remove oil, gas and coal stocks from their portfolios due to concerns over climate change.
“Motivated by concerns surrounding climate change, a growing number of our clients are seeking solutions that can help them divest from fossil fuel reserves while maintaining their strategic asset allocations,” said James Ross, global head of State Street's SPDR ETF business.
The new ETF was developed with the support of the Natural Resources Defense Council (NRDC), which is “a cornerstone investor in the fund, having found it to be an effective tool to invest in S&P 500 companies that do not own fossil fuel reserves.”
With a purpose to meet the needs of climate conscious investors, the fossil-fuel free ETF seeks to track the performance of the S&P 500 Fossil Fuel Free Index, which measures the performance of companies in the S&P 500 Index that do not own fossil fuel reserves.
A similar ETF, Etho Climate Leadership U.S. ETF (“ETHO”), was offered earlier this year by Etho Capital. ETHO follows “an equally weighted all-cap equity index that selects the most carbon efficient companies across industries. The index is completely divested of fossil fuel companies, as well as those in tobacco, weapons and gambling, and undergoes rigorous screening with expertise from global NGO partners and based on ESG (environmental, social and governances) performance data,” as per the issuer.
While the tendency to save the environment and being socially responsive seems to be the order of the day, such eco-friendly and socially conscious ETFs are bound to attract climate conscious investors.
Currently, State Street carries a Zacks Rank #3 (Hold). Some better-ranked banking stocks include Bank of Commerce Holdings BOCH, BofI Holding, Inc. BOFI and Central Pacific Financial Corp. CPF. All these stocks hold a Zacks Rank #2 (Buy).
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