04/2020 KIPLINGER’S PERSONAL FINANCE 27S
ustainable investing,
sometimes called ESG
for the environmental,
social and governance crite-
ria that define the investing
style, has taken the fund
world by storm. But it’s not
always possible to isolate
the E from the S and G, and
strategies vary, too. Some
portfolios are defined by
what they don’t own—firms
that derive most revenues
from fossil fuels, say. Others
concentrate on innovative
firms that are making the
planet greener, such as re-
newable-energy companies.
The 10 mutual funds and
exchange-traded funds high-
lighted below have at least a
partial focus on the environ-
ment. We’ve organized them
into three groups that define
different approaches: The-
matic ETFs that zero in on
climate change exclusively;
diversified funds that have a
sustainable bent; and actively
managed funds that hew to
an ESG-oriented investment
process and get high marks
for environmentally friendly
portfolios—whether that’s
their stated aim or not.
Which tack you take will
depend on how passionate
you are about battling cli-
mate change as well as how
much risk you want to take.
A LASER FOCUS
ON CLIMATE
The advantage of investing
in climate change in a fo-
cused way is that you can
take precise aim at an issue.
But the risk is higher, too.
These funds aren’t diversi-
fied, so don’t expect them
to perform in line with the
broad market. They’re best
used as satellite positions
in a diversified portfolio,
not as core holdings.
If alternative energy
is your thing, consider
INVESCO WILDERHILL CLEAN
ENERGY ETF (SYMBOL PBW, PRICE
$36, EXPENSE RATIO 0.70%),
which invests in firms that
focus on green and renew-
able energy sources—wind,
solar, hydro, geothermaland biofuel—and in technol-
ogies that facilitate cleaner
energy. California-based
Bloom Energy is a top-10
holding. It makes solid
oxide fuel cells, which pro-
duce clean and affordable
electricity by way of a
chemical reaction.
The fund holds some
foreign stocks, too. Nio is a
Shanghai-based maker of
luxury electric vehicles. Its
ES6 model, a sporty SUV,
can go more than 315 miles
on a full charge.
WilderHill Clean Energy
has a horrible 10-year re-3 Shades of Green Funds
cord, but its 9.9% five-year
annualized return is prom-
ising. Invesco’s Jason Bloom,
head of global macro ETF
strategy, says the returns
are in part a ref lection of
the sector’s rough early
days. “The market was right
about the growth in clean
energy. What it missed was
how difficult it would be
in the early stages to make
money,” he says. But volatile
results are also a sign of the
risk that comes with invest-
ing in thematic funds. Year
to year, the ride can be ex-
tremely rough. In 2018, the
fund lost 14.1%. The next
year, it gained 62.6%.
WilderHill Clean Energy
spreads its bets across a
range of alternative energies,
as opposed to only solar or
wind energy, say. That’s
good from a long-term per-
spective. “No one knows
which alternative-energy
technology will win today,
so don’t pick just one,” says
Bloom.
Or, you could cover your
bets with a couple of funds.
INVESCO SOLAR ETF (TAN, $32,
0.71%) focuses on solar power.
Its top holding is SolarEdge
Technologies, an Israel-
based firm that makes pan-
els that harness the sun’s
energy. FIRST TRUST GLOBAL
WIND ENERGY (FAN, $15 , 0.60%)
invests, as you might guess,
in wind energy. Vestas
Wind Systems, a Danish
maker of wind turbines, is
a top holding. These ETFsCLIMATE-MINDED FUNDS
10 PicksChoose among the funds below, balancing between your desire to
battle climate change and your need for a diversified portfolio.Fund (symbol) 1 year 3 yearExp.
ratio
Artisan Mid Cap (ARTMX) 27.4% 16.3% 1.19%
Dodge & Cox Stock (DODGX) 11.3 9.1 0.52
Green Century Balanced (GCBLX) 14.4 9.5 1.48
First Trust Global Wind Energy ETF (FAN) 18.9 9.6 0.60
Invesco Solar ETF (TAN) 39.3 24.3 0.71
Invesco WilderHill Clean Energy ETF (PBW) 42.9 26.2 0.70
iShares MSCI ACWI Low Carbon Tgt. ETF (CRBN) 17.3 11.4 0.20
SPDR MSCI EAFE Fossil Fuel Rsv. Free ETF (EFAX) 13.4 7.7 0.20
SPDR S&P 500 Fossil Fuel Rsv. Free ETF (SPYX) 22.6 15.1 0.20
VanEck Vectors Envir. Svcs. ETF (EVX) 16.0 12.8 0.55
Indexes
S&P 500-STOCK INDEX 21.7% 14.5%
MSCI ALL COUNTRY WORLD INDEX 16.0 11.0
MSCI EAFE INDEX 12.1 7.8
As of January 31. SOURCE: Morningstar Inc.Annual returnsThese funds and ETFs take varying approaches to sustainable investing.