An Environment-Conscious Real Estate ETF Hits Market

The environmental, social and governance (“ESG”) investing trend has remained a hot favorite among investors since the pre-outbreak period. Increasing regulatory requirements are helping the space to gain momentum. In Europe, Sustainable Finance Disclosure Regulation (SFDR) has recently been enacted.

Against this backdrop, iShares recently launched a fund on the environmentally-aware ETF (ERET). Below we discuss the fund in detail.

Inside ERET

The iShares Environmentally Aware Real Estate ETF looks to track the investment results of an index composed of developed market real estate equities while targeting increased exposure to green certification and energy efficiency relative to the parent index. United States takes about 60% of the fund. Japan takes the second spot at 9.9%.

The fund holds a total of 367 stocks. No stock accounts for more than 6.27% of the fund. Prologis REIT (6.27%), Equinix REIT (5.60%) and VICI PPTYS (VICI) are the top three holdings of the fund. Specialized REIT’s (16.28%), Retail REIT’s (15.78%), Industrial REIT’s (14.32%), Residential REIT’s (15.05%) and Office REIT’s (10.06%) are the top five industries of the fund. The fund charges 30 bps in fees.

How Does It Fit In a Portfolio?

Institutional investors are showing more interest for ESG (Environment Social Governance)-based products lately. As demand rises for green-focused investment vehicles, investors are coming up with green real estate ETFs.

Building stocks under this ETF have high energy efficiency, a healthier indoor environmental quality and make use of environmentally friendlier construction materials. The launch of the world’s first equities investment vehicle targeting property companies specializing and supporting green buildings is pointing the way for more sustainable investment platforms.

The real estate industry’s ability to deliver greener buildings – mainly through overhauling the existing assets – is important, said Ali Ingram, director and sustainability lead in JLL’s European office investment team, per a source. In New York, modernizing 50,000 buildings over the next decade could cost owners between $16.6 billion and $24.3 billion, according to New York’s Urban Green Council, per the same article.

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Competition

There are already two green building ETFs in place. Global X Green Building ETF GRNR andInvesco MSCI Green Building ETF GBLD. GRNR and GBLD charge 45 bps and 39 bps in fees. GBLD puts 94.15% weight in real estate with the United States taking about 29.3% weight. Japan takes the second spot with 27% exposure.

Global X Green Building ETF provides exposure to companies that are positioned to benefit from increased demand for buildings that reduce or eliminate negative impacts and create positive impacts, on the natural environment. Real Estate takes 65% weight of the fund with the United States taking about 26.9% weight, followed by Japan (19.2%) and France (10.9%). Amongst the three funds, ERET charges the least, which may help the newbie to make a killing.

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Invesco MSCI Green Building ETF (GBLD): ETF Research Reports

Global X Green Building ETF (GRNR): ETF Research Reports

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