UN-backed climate ETF “on brink of failure”… Now that’s funny!

If you are among the 99.9% of literate people who know what an ETF is, please skip the following explanation…

What Is an Exchange-Traded Fund (ETF)?

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other asset, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.

The first ETF was the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index, and which remains an actively traded ETF today.

Investopedia

Now, back to our story…

Guest “Now that’s funny right there” by David Middleton

Climate ETF on brink of failure months after UN summit launch

Financial Times

FT (Financial Times) appears to be very touchy about being quoted. So I won’t quote anything other than the headline in this post.

Impact Shares MSCI Global Climate Select ETF (NTZO) was launched with great fanfare during COP 26 in Glasgow…

UN and partners launch climate-focused ETF
By Adva Saldinger // 08 November 2021

The United Nations and exchange-traded funds may seem an unusual combination. But on Wednesday, nonprofit ETF manager Impact Shares, in partnership with the U.N. Capital Development Fund, launched a climate-focused ETF.

The Impact Shares MSCI Global Climate Select ETF, or NTZO ETF, will be managed by Impact Shares, which is backed by The Rockefeller Foundation. It includes companies that meet a set of strict climate and other criteria.

Unlike some other climate ETFs, NTZO completely excludes all companies that own or profit from fossil fuels. It also requires participants to adhere to the principles of the United Nations Global Compact and bars any that profit from weapons, guns, alcohol, tobacco, or palm oil.

[…]

Devex

NTZO has apparently drawn little more than net-zero interest from investors, amassing less than $2 million and will likely be shut down in March according to the Financial Times.

Why is NTZO about to go net zero?

NTZO is constructed with the aim to track the performance of the MSCI ACWI Climate Pathway Select Index (the “Index”). The Index is constructed from the MSCI ACWI Index by excluding securities based on certain ESG and Climate Change related criteria, followed by an optimization-based approach that aims to:

*Increase the exposure to companies participating in opportunities associated with the transition to a low carbon economy.

*Increase the weight of companies with science-based emission reduction targets.

*Follow a decarbonization trajectory: reduce Index’s weighted average carbon intensity by at least 7% YoY and 30% relative MSCI ACWI Index.

*Significantly improve the ESG profile of the Index: at least 25% higher index’s ESG Score (weighted average ESG Score of index constituents) compared to MSCI ACWI Index.

[…]

Impact Shares

Here’s a comparison with Proshares Ultra Oil & Gas ETF (DIG):

NTZO avoids all of the stocks that DIG goes long on.

IHS Markit Ltd? I interpret 3d seismic surveys on an IHS platform and download well logs from an IHS database. Among the many upstream oil & gas related products and services IHS provides are:

I use multiple IHS products and services every day I go to work exploring for oil & gas. Of course, all of these products and services run on Microsoft operating systems. And pretty well every map and cross section I generate winds up as an Adobe PDF. Do you think NTZO fund managers realize that the oil & gas industry benefits from IHS, Microsoft, Adobe and many other tech companies they invest in? Just ask Greenpeace…