Engine No. 1 is debuting an actively-managed exchange-traded fund that will invest in companies focused on strategies for deeply slashing the world’s carbon-dioxide emissions.
The Engine No. 1 Transform Climate ETF (ticker NETZ) will invest in mostly large-cap U.S. listed companies that have a long-term strategy to benefit from the transition to net-zero carbon emissions, the firm said in statement. Keeping in line with the activist firm’s philosophy to enact ESG principles via proxy voting and working with incumbent companies, the fund won’t shy away from investing in industries including automobiles, energy, and agriculture that are heavily tied to the production of greenhouse gases.
“Fewer than 200 companies account for 80% of the corporate greenhouse gas emissions. There is no path to net zero that doesn’t go directly through them,” said Yasmin Dahya Bilger, head of ETFs at Engine No. 1, via phone. She said the fund will hold “25-50 high-conviction names” that generate large emissions but also have a long-term strategy to reach net-zero that Engine No. 1 can support. It’s what makes this ETF different than other ESG-linked funds on the market that often exclude entire sectors like oil and gas.
One of the ETF’s holdings will be General Motors Co., she said, a company that Engine No. 1 began a collaborative partnership with last year.
The activist investor shook up the ESG-world when it won a campaign to replace three seats on the board of Exxon Mobil Corp. last May. Now, it’s broadening its reach with a line-up of ETFs. Engine No. 1’s first ETF–VOTE–has jumped 6.8% since its July 2021 launch. VOTE tracks an index of 500 large-cap equities and focuses on making ESG-related change through proxy voting.
NETZ will have an expense ratio of 75 basis points. © 2022 Bloomberg L.P.