US-based Carbon Collective, which has developed an index of climate change companies mainly for retirement plan investments, is planning the launch of an Exchange Traded Fund (ETF) of equities in companies providing climate change solutions.
- The Carbon Collective Climate Solutions set to launch actively managed Exchange Traded Fund.
- The ETF is distinct from ESG funds as it trades in pure climate oriented companies.
- Impact investing looks poised to override ESG in sustainable funding criteria.
US based company The Carbon Collective Climate Solutions (CCS) is launching an ETF under the ticker “CCSO.” The CCCS is best known for offering dedicated company sponsored retirement plans, called 401(k) in America, comprised solely of companies with a climate change agenda.
The uptake of these 401 (k)’s is mostly limited at present to companies that have a strong climate change ethos. CCCS has what it claims to be the most comprehensive list of climate solution stocks.
According to a regulatory filing CCSO will track about 200 US companies from small to large market cap that have a green agenda, in different industries; electricity, agriculture, technology and so on.
A basic criterion is that at least half the company’s revenue must come from climate solutions. In common with other climate denominated ETFs, CCCS’s ETFs will categorically banish companies that by their nature produce high carbon dioxide emissions like oil and gas companies.
ESG trackers can obfuscate from real climate action
Although there was a large swell of investor interest in ESG funds, (ESG ETFs rose 53% last year to $7.2 trillion according to Bloomberg), concerns over greenwashing have dented confidence.
Ratings agencies that grade ESG performance rate a firm’s efforts to address climate risks rather than rating their actual products and services. This is why Tesla was not on a list in May of the most socially responsible companies in America – the S&P 500 ESG index – while Amazon and ExxonMobil were.
Impact investing on the other hand, more the buzzword now among those looking to advance the agenda of investing in sustainable goals, assesses companies and activities actively solving environmental and social problems.
Impact investment as an asset class faces market challenges that include how to report and measure on the environmental and social performance of those investments. In the case of CCSO Equity Fund ETF, all qualifying companies will have active strategies on climate change solutions.
Climate change ETFs become focus for institutional investing
Mainstream asset managers are recently launching exchange traded funds based on equities that seek to solve the crises of climate and nature.
Indeed a survey of 50 large pension funds based in North America, Europe and Australasia, arrived at the consensus that exchange traded funds based on impact were the future for net zero investing in providing scale and transparency