2828 KIPLINGER’S PERSONAL FINANCEKIPLINGER’S PERSONAL FINANCE^ 04/202004/2020
INVESTING
index of foreign stocks in
developed countries. Plus,
it yields 3.0%.STOCK PICKING
THAT SKEWS GREEN
Investing with all ESG
factors in mind can be like
a game of Whack-A-Mole.
A firm with good scores on
environmental measures,
such as low carbon emis-
sions, might have a bad
mark on governance mea-
sures, such as a board that
lacks diversity. “There are
trade-offs,” says Joel
Schneider, deputy head of
portfolio management at
Dimensional Fund Advisors.
“You have to look company
by company.” That’s why
the task is sometimes best
left to the pros.
GREEN CENTURY BALANCED
(G C B L X , 1. 4 8%) has a very
green pedigree. The fund
firm, Green Century Capi-
tal Management, and sub-
adviser Trillium Asset
Management have invested
sustainably for decades.
And all profits from Green
Century funds—two index
funds and Balanced—go to a
group of environmental and
public health nonprofits.
A trio of managers pick
the stocks and bonds for
Balanced with a variety of
ESG factors in mind. They
are active shareholders,
too, says comanager Cheryl
Smith, often working with
companies to improve busi-
ness practices across a range
of issues, from CEO pay
to boardroom diversity to
deforestation.
Tech companies such
as Apple, Microsoft and
Amazon.com are top stock
holdings. The fund won’t
invest in firms that maketrack global indexes and
own U.S. and foreign stocks.
VANECK VECTORS ENVIRON-
MENTAL SERVICES (EVX, $106,
0.55%) isn’t as single-minded
as other ETFs in this group.
But dealing with a lot of
trash is a recurrent theme.
It holds shares in waste
collection companies, recy-
cling firms, and soil remedi-
ation and environmental
consulting services.
Waste Management and
Darling Industries (see page
22) are two of the 25 stocks
in the portfolio. So are Evo-
qua Water Technologies,
which boosts municipal
water quality and industrial
firms, and Clean Harbors,
which provides, among
other things, hazardous-
waste disposal services.
The fund has only $38
million in assets—less than
we’d like. But it has re-
turned 12.6%, on average,
over the past five years,
in step with the 12.4% gain
in Standard & Poor’s 500-
stock index.INDEX FUNDS WITH AN
ENVIRONMENTAL TILT
Who says you can’t have
it all? These three ETFs at-
tack certain climate change
problems and deliver market-
like returns. The catch is
that the underlying holdings
may not be as vigorously
climate conscious as some
investors want.
ISHARES MSCI ACWI LOW
CARBON TARGET ETF (C RB N ,
$128, 0.20%) gives greater play
to companies with lower
carbon emissions. But the
strategy is executed with
the parent index in mind,
in this case the MSCI All
Country World index. The
fund’s country and sectorexposures stay within range
of those of the index. The
ETF and index have similar
top holdings: Apple, Micro-
soft and Facebook. Its top
country exposures are alike,
too: U.S., Japan and the U.K.
But not everything is
matchy-matchy. Tech,
health care and industrial
firms figure more promi-
nently in Low Carbon Tar-
get than in the index. And
energy stocks get less play
in the ETF than in the in-
dex. All of which goes some
way to explain why the
fund outpaced the ACWI
index over the past one,
three and five years.
A depressed energy sector
has benefited funds that
avoid firms with fossil fuel
reserves. The 15.1% annual-
ized three-year return of
SPDR S&P 500 FOSSIL FUEL
RESERVES FREE ETF (SPY X , $7 9,
0.20%) beats that of the S&P- The fund essentially
holds all of the companies
in the S&P 500 except those
with fossil fuel or thermal
coal reserves. ExxonMobil
and Chevron, for instance,
are out. But there are in-
consistencies. For instance,
Phillips 66 is among the
ETF’s holdings. Perhaps it
doesn’t have the kind of re-
serves required to merit ex-
clusion from the fund, but
it owns 13 refineries with
a net capacity of 2.2 million
barrels of crude oil a day.
Investors seeking interna-
tional exposure should con-
sider SPDR MSCI EAFE FOSSIL
FUEL RESERVES FREE ETF (EFAX,
$71, 0.30%). It holds stocks
in large and midsize com-
panies, none of which own
oil, gas or coal reserves that
would be used for energy,
in 21 developed countries.
Over the past three years,
the fund has returned 7.7%
annualized, in line with the
MSCI EAFE broad market