Companies associated with fossil fuels are taking some heat these days from investors and activists, and those who get burned up about burning fossil fuels can match their money with their beliefs with Thursday’s launch of the ETHO ETF (ETHO), which claims to be the first diversified, socially responsible and fossil-free exchange-traded fund.

The fund tracks the Etho Climate Leadership Index composed of 400 companies that’s equal-weighted and devoid of companies associated with oil, coal and natural gas. The index was created by Etho Capital, a San Francisco-based investment management company that says its mission is tackling climate change by making sustainable investing mainstream.

This is Etho Capital’s first ETF product, and the company says it expects to release more financial products in 2016 with more active portfolio construction.

In addition to being fossil fuel-free, Etho touts its index as one that picks equities based on climate efficiency while rigorously screening for social responsibility. In short, it’s checking off all of the boxes in the growing movement variously labeled as SRI (socially responsible investing or, if you prefer, sustainable, responsible and impact investing) or ESG (environmental, social and governance) investing.

The ETHO ETF was launched in partnership with Factor Advisors, a subsidiary of ETF Managers Group, a Summit, N.J.-based provider of private-label services to help create and market ETF products that had a hand in last month’s roll out of the Restaurant ETF (BITE). Factor Advisors handles the daily operations of the ETHO ETF. The fund’s net expense ratio is 75 basis points.

According to Etho Capital, 10 years of backtesting shows the Etho Climate Leadership Index outperformed the S&P 500 Index on a risk-adjusted basis while reducing greenhouse gas pollution per dollar invested by 50 to 80 percent. Sounds great, but backtesting isn’t the real world.

There are already a small number of mutual funds that wear the fossil-free mantle. Among them are the Parnassus Endeavor Fund (PARWX), and the Pax World Growth Fund (PXWGX) and the Pax World Global Environmental Markets Fund (PGRNX), along with the Green Century Equity Fund (GCEQX) and the Green Century Balanced Fund (GCBLX). They don’t all follow the same strategies and not all of them have been fossil fuel-free since inception, and their performance track records are mixed.

The fossil-free divestment movement has gained momentum with investors ranging from endowments to individuals, and Etho Capital and other investment managers in the green/sustainable investing space believe the movement will have legs as millennials step up their investing game because surveys show they have a greater interest in ESG-type investing than older generations.

Given that, it’s not unreasonable to expect more fossil fuel-free investment products coming down the pike.

First « 1 2 » Next