Betashares' latest exchange-traded fund (ETF) has just hit the ASX. The Climate Change Innovation ETF (ASX: ERTH) offers one-trade exposure to 90 global companies that derive at least 50% of their revenues from products and services that help address climate change and/or other environmental issues.
It is very much a macro play on arguably one of the most significant current addressable market opportunities there is.
What companies are in ERTH?
The ASX ERTH ETF is comprised of 90 companies that are substantially diversified in terms of industries and what they do. These range from car manufacturers and digital signature providers to vegan ready-to-eat meals and air conditioner manufacturers.
You get the idea, it's pretty broad — and rightly so. The climate challenge is not limited to petrol-guzzling cars on our roads, it permeates nearly every nook and cranny of society.
The top ten holdings in the ERTH ETF are as follows:
- Trane Technologies PLC (NYSE: TT)
- Infineon Technologies AG (ETR: IFX)
- Zoom Video Communications Inc (NASDAQ: ZM)
- Cie De Saint-Gobain SA
- DocuSign Inc (NASDAQ: DOCU)
- Tesla Inc (NASDAQ: TSLA)
- East Japan Railway Co
- Nio Inc (NYSE: NIO)
- Vestas Wind Systems
- Plug Power Inc
As you can see, ERTH extends much further than the ASX. Most people will have heard of Tesla, and Zoom, possibly even the digital signature provider DocuSign. But I doubt you've heard of the largest holding in this ETF, Trane Technologies… Well fortunately for you, I used to work as a mechanical engineer in a previous life!
Trane Technologies provides a range of heating, ventilation, and air conditioning (HVAC) products. HVAC systems actually play a large role in the energy consumption and energy efficiency of most buildings in the world. Hence, as emission targets tighten, HVAC producers find themselves at the forefront of having to invent more energy-friendly products.
The market opportunity
Companies that address climate change in some way are gaining momentum. Furthermore, more money is being poured into the sector as the world slowly but surely recognises the problem. Even the ASX's latest debutant, ERTH, already has over $7.5 million in assets under management.
The not-for-profit Carbon Disclosure Project (CDP) released a report in 2019 indicating that 215 of the world's biggest companies reported almost US$1 trillion at risk from climate impacts.
Billionaire investor, Chamath Palihapitiya, has poured billions into investments seeking to address climate change. The venture capitalist even expects the first trillionaire to be made in climate change.
The world's first trillionaire will be made in climate change.
Chamath Palihapitiya (@chamath) October 21, 2020
However, buying the ERTH ETF probably won't make you a trillionaire. At the time of writing, ERTH is down 0.4% to $12.75.
