GSFP has the right recipe for investing in climate change

Sthe cores of exchange-traded funds claim to provide platforms for market participants to tap into the theme of climate change investing.

While investor choice is generally a good thing, given the pace of expansion of this particular segment of ETFs, it is good for advisors and investors to accurately assess a fund’s degree of climate change exposure. particular.

The Goldman Sachs Future Planet Equity ETF (GSFP) is an example of an ETF that alleviates these concerns. Although GSFP does not openly mention “climate change” in its name, ETF Goldman Sachs is nonetheless relevant in this conversation.

“As climate-focused funds continue to grow in popularity, one question keeps investors up at night: how much of my portfolio actually deals with climate change?” wrote Morningstar analyst Alyssa Stankiewicz. “In a recent study, we found that climate funds in the United States, which we define as those with a branded climate-focused investment mandate, offer more for their money in terms of addressing climate change. . Leading the pack in exposure to climate action are clean energy and technology funds, followed by climate solutions funds.

Part of the climate change appeal with GSFP stems from the fund’s focus on companies that provide decarbonization services and technologies. Various corporate and government decarbonization goals are seen as central to broader climate change initiatives.

Second, in a fund segment littered with index funds, GSFP stands out for its active management. Active managers can more agility navigate the climate change investment landscape and potentially unearth attractive opportunities related to these stocks before these stocks are swallowed up by index ETFs. These are points to ponder as investor interest in climate change funds remains high.

“In the United States, interest in climate funds has exploded. In 2021, investors poured nearly $13 billion into these funds, a 43% increase from the 2020 record and 18 times the total seen five years ago,” Stankiewicz added. “Increasingly, regulators are also asking public companies to report on climate-related risks. Clean energy/technology funds, which target companies leading the transition to renewable energy, remain the most popular, but other categories are gaining ground.

Overall, the GSFP bridges the gap between exposure to cleantech companies and those with credibility in climate action – a combination that could be positive in the long run for investors.

“Overall, as expected, our research found that climate funds in the United States have more exposure to Climate Action than their peers in the Morningstar category and more exposure to Climate Action than to other impact themes. Eight of the top 10 climate funds exhibited at Climate Action fall into our clean energy/tech category,” Stankiewicz concluded.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.