NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, November 13, 2015

Investors looking to ditch their stocks in high-carbon U.S. companies can steer their dollars to Etho Capital’s soon-to-be-launched, first-of-its-kind investment fund. The fund eschews fossil fuel producers entirely and considers only companies with cleaner-than-average carbon footprints.

The Etho exchange-traded fund (ETF), which will start trading on the New York Stock Exchange next week, includes 400 publicly listed companies from a diverse mix of industries, including healthcare, IT, manufacturing and consumer goods. Etho Capital says it narrowed the list to businesses that are taking the biggest strides to reduce harmful greenhouse gas emissions while still delivering strong financial returns for investors.

“It’s still a commonly held belief that sustainable investing means you don’t care as much about your financial performance,” said Ian Monroe, co-founding president and chief sustainability officer at Etho Capital in San Francisco. “Our mission is to create the world’s best fossil-free investment products that are superior in terms of overall sustainability and financial performance.”

The climate-focused ETF is the latest outgrowth of the so-called “impact investment” movement. U.S. and global investors — especially millennials in their late 20s and early 30s — are increasingly gravitating toward funds and companies that reflect a broad range of values, including lower environmental impacts, strong human rights records and decent wages for workers. About 71 percent of individual investors say they’re interested in these types of investments, the Morgan Stanley Institute for Sustainable Investing found in a February survey.

Climate issues in particular are gaining attention in financial circles in the run-up to the United Nations climate change conference in Paris, which starts Nov. 30. Negotiators from nearly 200 countries have agreed to forge a deal to reduce global emissions sharply and help the most vulnerable nations adapt to rising sea levels, brutal drought and other climate effects.