Case Study - BetaShares Climate Change Innovation ETF
Exchange Traded Fund (ETF) manager BetaShares will launch an ETF that invests in global companies tackling climate change, called the BetaShares Climate Change Innovation ETF (ERTH).
Richard Montgomery, investment communications manager at BetaShares, responded to some questions about the product and the popularity of sustainable ETFs.
Are you seeing more customer demand for ethical/sustainable ETFs?
We continue to see increasing interest in ethical investing. Concerns around the environment and global warming have been on the rise in recent years, and we believe the pandemic has also brought social and governance factors more into focus.
As we emerge from the pandemic, we think investors will generally favour companies that demonstrate an appropriate weighting to social and governance considerations, rather than a ‘profit above all else’ attitude. Factors such as how a company treats its employees through these times, and whether it does the right thing by its customers, are likely to come more into play. These add to the ongoing focus on climate and decarbonisation, which will continue to be key themes for ESG investors.
In 2020, total flows within the ESG space in the Australian ETF industry reached nearly $1.39 billion, which was 2.5 times more than the previous year’s flows and flows into BetaShares ESG suite made up 75 per cent of this.
What percentage of all your funds under management (FUM) are in your sustainable ETFs?
Our ethical suite has a total FUM of $2.2 billion (as at 26 February 2021), which represents 13 per cent of BetaShares total FUM. BetaShares ethical ETFs currently account for around 75 per cent of FUM in all ethical ETFs traded on the ASX.
Is the index that you will be using for the Climate Change Innovation ETF one you are building/commissioning?
ERTH will aim to track the total return performance of an index of up to 100 of the largest global companies that derive at least 50 per cent of their revenues from products and services that help to address climate change and other environmental problems through the reduction or avoidance of CO2 (carbon dioxide) emissions.(*)
The scale of the challenge the world faces means that innovation is called for in a range of climate and environmentally-friendly activities. That’s why ERTH will provide broad exposure to companies associated climate change solutions including not only clean energy but also electric vehicles, energy efficiency technologies, sustainable food, water efficiency and pollution control.
* ERTH is subject to final regulatory approval. BetaShares does not have any control over, or responsibility for, the composition, calculation or availability of the index. The index provider is not a related company of BetaShares.