Climate change is not a facade but an issue that could hurt countries finances if necessary measures are not taken. Investment firm BlackRock has unveiled a new sovereign bond ETF that weight’s countries based on their level of risk to climate change. The new ETF comes amid growing calls for the fund industry to do more to criticize governments that are holding back on ESG investments.
Climate Change ETF
The n climate change bond ETF takes into consideration the fact that there is a direct link between climate change and creditworthiness. While the investment industry has mostly focused on the impact of climate change on corporations, it’s becoming increasingly clear that the issue could have a significant impact on government finances. The fact that 78% of the global fossil fuel reserves are owned by government should arouse concerns as focus shifts to combating global warming.
The iShares Govt Bond Climate Ucits ETF (SECD) is the new climate bond ETF that began trading on the Frankfurt’s Zetra bourse. In the ETF, government debts from Germany, Spain, Netherlands and Belgium and Ireland would be underweighted. This is in part because of the countries higher greenhouse gas emissions and greater exposure to climate change risks.
Germany faces one of the greatest risks given that coal and Lignite account for 28.2% of the country’s total power production Netherlands share in the index drops to 0.22% given the country’s vulnerability to rising sea levels and small size of the renewable energy sector.
The ETF is expected to elicit strong interest as investors come to terms with the fact that climate risk will impact macro and country level, unlike in the past where focus was on its potential impact on corporations.
Pacer ETF New ETFs
Separately Pacer ETF has completed the acquisition of two factor based ETFs conversely expanding its factor suite of products. Salt High truBeta TM US Market ETF and Salt Low truBeta TM US Market ETF are the two additions.
Pacer ETF has already renamed Salt High truBeta TM US Market ETF as Pacer Salt Hugh truBeta TM US Market ETF (SLT). The ETF seeks to provide exposure to large and mid-cap companies expected to outperform the overall market. Likewise, it is an ideal ETF from gaining exposure to market sensitive sectors.
Salt Low truBeta US Market ETF (LSLT) has since been renamed to Pacer Low truBeta TM US Market ETF (LSLT) The Fund is for investors seeking exposure to large and mid-cap companies that are historically less volatile.
The acquisition of the ETFs comes at a time of soaring market volatility which has forced investors to seek investment vehicles with low downside risks. Strategic focus on assessing beta should allow Pacer to offer investors two unique products that align with the challenging market environment. The two ETF also reflect Pacer’s resilience and strategic advantages amid a challenging environment triggered by the COVID-19 pandemic. The acquisition brings to four the total number of ETFs that the ETF provider has acquired since last year.