Funds with an ESG focus tend to have higher management fees. Despite usually outperforming their peers, even in unusual circumstances like the start of a global pandemic, the fees can cause some investors to balk.
If you need income, ESG won’t be the first metric that jumps to mind, but for investors seeking a clean conscience and a clean planet can still fill their wallets with big yields from the Invesco MSCI Sustainable Future ETF (ERTH). With a staggering dividend yield of 14.83%, you might expect ERTH to have an expense ratio north of 1.50. Its ESG focus aside, it is an Impact fund, after all. Impact funds have the goal of generating measurable, beneficial social and environmental impact — in addition to robust financial returns. But they also tend to be even pricier than their already pricy ESG peers. In ERTH’s case, the expense ratio is a modest 0.55. Expensive for a passive fund, perhaps, but a bargain in its peer group, especially considering that its yields would make even a healthy REIT jealous.
ERTH uses a multi-cap global strategy and three-quarters of its holdings come from six sectors:
- Alternative energy
- Energy efficiency
- Green building
- Sustainable water
- Pollution prevention and control
- Sustainable agriculture
This is obviously a narrow focus, which does mean additional risk, but these sectors are likely to see tremendous growth as climate change continues to worsen. ERTH’s holdings include companies poised to grow as they make crucial efforts to solve the complicated problems that society faces today. Their third-largest holding, Vestas Wind Systems, designs, manufactures, and services wind turbines in over 85 countries. As the world pivots to green energy, Vestas is the type of the company that is going to be on the bleeding edge. Other holdings include Plug Power, the leading provider of clean hydrogen and zero-emission fuel cell solutions, and Umicore, a company focused on materials and recycling.
These innovative companies will put out high dividends to investors as they work to mitigate the effects of climate change and build a safer, better world. ERTH’s high-dividend yields aren’t just good for their altruistic benefits, they’ll also be an important tool for hedging against inflation, which continues to stalk the economy.
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