Experts predict that the impact of climate change on everything from housing to public health will increase over time. A A study conducted by the Energy Policy Institute at the University of Chicago The World Bank estimates that for every 1 degree Fahrenheit increase in average temperature, the costs to the US economy will increase by 0.7% of GDP.
Investors looking to back companies working to mitigate climate change may turn to environmental, social and governance (ESG) investment principles. These investors use a set of criteria to determine whether a company’s operations and goals meet a threshold of environmental responsibility, corporate citizenship, and sound governance.
Not surprisingly, ESG investing metrics vary widely depending on the investor. In fact, some environmentally conscious investors may not be particularly concerned with how well a potential target company performs on the social and governance components of the screen. For investors looking to simplify the process and target companies with a track record of positive environmental impact, three ETFs provide broad exposure: iShares Climate Conscious & Transition MSCI USA ETF Nasdaq:USCLXtrackers MSCI USA Climate Action Equity Fund NYSEARCA: dryand the SPDR MSCI USA Climate Paris Aligned ETF Nasdaq: NZOS. As a bonus, all three companies outperformed the S&P 500 in the year before January 2, 2025.
iShares Climate Conscious Transition MSCI USA ETF
iShares Climate Awareness and Transition MSCI USA ETF Today
iShares Climate Conscious Transition MSCI USA ETF
As of 03/01/2025 at 05:22 PM ET
- 52 week range
- $55.24
▼
$73.52
- Dividend yield
- 1.17%
- Assets under management
- $2.65 billion
USCL is not a traditional ESG-focused ETF; Rather, it seeks to invest in large and medium-sized US companies that are most likely to benefit compared to their sector peers from the transition to a low-carbon economy. The fund searches for companies based on current emissions levels, emissions reduction targets, green business revenues, and similar measures. Thus, companies may not be specifically focused on ESG goals, but they are advantageously positioned to benefit from either a discouraging regulatory environment or a broader secular shift in this direction.
In the year before January 2, 2025, USCL returned just over 27%. This outperformance of the broader market may be due at least in part to its focus on hot technology companies like NVIDIA Corp. Nasdaq: NVDA and Meta Platforms Inc. Nasdaq: Meta. The fund also offers investors a very modest expense ratio of just 0.08% and a strong asset base of over $2.2 billion as of the above date.
Xtrackers MSCI USA ETF for climate-related stocks
Xtrackers MSCI USA Climate Action Stock Mutual Fund Today
Xtrackers MSCI USA ETF for climate-related stocks
As of 03/01/2025 at 04:39 PM ET
- 52 week range
- $29.04
▼
$38.69
- Dividend yield
- 1.32%
- Assets under management
- $2.43 billion
USCA targets the MSCI USA Climate Action Index, a broad group of companies that are leaders in their sectors “in terms of their locations and actions related to the climate transition.” While this language is somewhat vague, the index strikes a strong balance between market cap, momentum and value attributes, and sectors. As of November 29, 2024, the index consists of a mix of information technology (26%), financial services (14%), consumer discretionary (13%), communications services (12%), and other sectors.
USCA’s core index also screens companies based on MSCI’s Environmental, Social and Governance (ESG) business engagement metrics, ensuring companies adhere to environmental, social and governance (ESG) principles. Given the complexity of portfolio construction, USCA is a good deal for investors with an expense ratio of 0.07%. The fund returned 27.2% last year and had an asset base of just under $2.4 billion as of January 2, 2025.
SPDR MSCI USA Climate ETF Aligned with Paris
SPDR MSCI USA Climate Paris Aligned ETF today
SPDR MSCI USA Climate Paris Aligned ETF
As of 03/01/2025 at 05:22 PM ET
- 52 week range
- $26.40
▼
$34.03
- Dividend yield
- 5.39%
- Assets under management
- $2.58 million
NZUS provides investors with a broad approach to investing based on climate ideals. It seeks to increase exposure to sustainable investments as defined by the Task Force on Climate-Related Financial Disclosures and the EU Paris Compliant Standard – a set of company guidelines on governance, strategy, risk management and other climate-related concerns – reducing exposure to transition risks associated with climate change. Climate. The Paris Agreement-compliant standard aligns with the Paris Agreement, an international treaty aimed at limiting rising global temperatures.
Like USCL and USCA, NZUS tends to be weighted towards major technology players, but has a significant bias towards big names, while the aforementioned funds are evenly split between large and mid-caps. NZUS has a one-year return of 24.3%, beating the broader market in the past year. Compared to other funds on this list, its asset base is much smaller – NZUS has less than $3 million in assets under management as of 2 January 2025, and much lower trading volume than its competitors. These factors may negatively impact liquidity and ease of trading for climate-focused investors.
Before you consider the iShares Climate Conscious & Transition MSCI USA ETF, you’ll want to hear this.
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