Listen to enough earnings calls and political commentary and an investor is bound to hear increasing talk of climate change and net-zero goals. Fortunately, that’s a trend easily accessible via exchange traded funds, including some newcomers. That’s a positive for market participants looking to align portfolios in values-based fashion. ETFs rooted in environmental, social, and governance (ESG) principles are all the more relevant when considering the depth of various global net-zero ambitions.
“Net zero is shorthand for ‘net-zero greenhouse gas emissions by 2050,’ with a 45% reduction in emissions by 2030. The rise of carbon dioxide and other greenhouse gas emissions has caused global warming. Global warming is a major threat to the financial system, posing risks for companies and all manner of investments,” noted Morningstar.
Enter the Calvert US Large-Cap Core Responsible Index ETF (NYSE Arca: CVLC). CVLC debuted in early February as part of a six-ETF suite courtesy of Morgan Stanley Investment Management (MSIM). All six rookie ETFs bear Calvert branding.
CVLC follows the Calvert US Large-Cap Core Responsible Index, and while the new ETF is a broad ESG strategy, it does offer investors ample exposure to climate change and net-zero trends. In fact, CVLC’s breadth is an asset due to the various ways in which corporations and governments can achieve net-zero objectives.
“That would involve replacing coal, gas, and oil-fired power with renewable energy sources like wind or solar and capturing carbon and other greenhouse gases to compensate for remaining emissions. Each net-zero target comes with a pathway to achieving it,” added Morningstar.
CVLC touches on another important theme. The ETF separates ESG contenders from pretenders. Said another way, plenty of companies are talking about ESG and net-zero commitments, but a smaller number are actually taking relevant action.
For example, CVLC holdings such as Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), and Tesla (NASDAQ: TSLA), just to name a few, have clearly stated net-zero goals and are taking action to that effect or, in the case of Tesla, contributing to the cause via carbon-reducing products.
CVLC’s holdings-level net-zero attributes are pertinent to investors because more market participants, including asset managers and active managers, are demanding that companies address climate change.
Net-zero is likely to be “an increasingly important criterion for sustainable funds. It’s a pretty tangible thing for investors—so long as you know what net zero means,” noted Morningstar analyst Jon Hale.
For more news, information, and analysis, visit the ESG Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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