Climate Change Solutions ETF
Invest in companies developing innovative climate change solutions.
Most ESG-focused exchange-traded funds (ETFs) use exclusionary strategies that track an underlying index without the "bad" stocks. Unfortunately, this means investors are holding companies like Apple Inc., not those actively solving the climate crisis. Instead, impact investors should turn their attention to inclusionary funds.
While JPMorgan isn't exactly a beacon of light for impact investors, the JPMorgan Climate Change Solutions ETF (TEMP) provides one of the few inclusionary equity ETFs.
What's the ETF's Strategy & Holdings?
The JPMorgan Climate Change Solutions ETF (TEMP) combines human and artificial intelligence to identify and invest in companies developing innovative climate change solutions. In particular, the company has a team of 90 analysts that use natural language processing (NLP) to parse vast data sets to find climate-focused companies.
The company begins with an index of about 13,000 public companies and then excludes outright "bad" companies, such as fossil fuel producers. Next, it identifies companies committed to climate solutions using NLP, determines if they contribute to sustainable outcomes, and assesses the stock's valuation to see if it's an excellent opportunity.
The fund holds a portfolio of between 60 to 120 companies worldwide. About one-third of its portfolio consists of U.S. stocks, with the remainder spread across France, Ireland, Germany, and other countries. Nearly half of these companies operate in the industrial sector, with the rest focused on utilities, information technology, and materials.
How Might It Fit into Your Portfolio?
The JPMorgan Climate Change Solutions ETF (TEMP) provides broad exposure to international equities across several industries. Not surprisingly, the fund tracks the MSCI AWCI Index as its benchmark, making it a sustainable alternative to any globally-focused equity allocations – albeit with fewer companies in its portfolio.
With its 0.49% expense ratio, the fund isn't that much more expensive than comparable mutual funds. While cheaper exchange-traded funds provide global diversification, few options offer an opportunity to make an impact while employing fundamental analysis. As a result, the fund offers a unique opportunity for sustainability-focused investors.
The Bottom Line
The JPMorgan Climate Change Solutions ETF (TEMP) offers a more impactful alternative to conventional all-world ESG ETFs.
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Dec 04, 2023
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Impact FocusRenewable Energy
- Invests in public companies providing solutions to address climate change or implementing business practices in response to climate change.
- Provides exposure to sustainable transportation, renewable energy, recycling and re-use, and other themes.