Rize rises to ESG sunrise
London-based independent ETF issuer Rize has launched an environmental thematic ETF that aims to work within the European Union’s global warming objectives.
The Rize Environmental Impact 100 UCITS ETF (LIFE) will track an index that is built by Foxberry, and uses data from Sustainable Market Strategies (SMS), an investing consultancy.
LIFE’s index starts with the EU’s global warming reduction objectives. Within the EU’s framework, LIFE then identifies several “sub-sectors” that support the EU’s global warming goals: clean water, electric vehicles, circular economy, renewables and hydrogen.
Global companies are scored based on revenue purity: the more revenue they draw from these sub-sectors, the higher the score. As an additional measure, SMS rates companies based on how environmentally friendly they are.
LIFE then picks and weights companies with the best scores in each sub-sector.
LIFE charges 0.55%.
Analysis – a cleverly disguised cleantech ETF
This is a timely ETF, given the latest environmental events.
It is targeting a niche: cleantech. Cleantechs are companies that reduce our dependence on greenhouse gases. A big part of it of course is clean energy utilities companies – like Vestas and Meridian – who take a large slice of this ETF.
Cleantech is receiving lots of attention, thanks partly to politics—the EU’s green new deal, Biden’s commitment to the Paris Accords. But also because the effects of global warming are becoming increasingly hard to ignore. Cleantech ETFs have seen strong inflows this year.
LIFE wants to impress investors that it is more than just a cleantech ETF. To that end, its index methodology, website and KIID, talk a lot about the EU’s global warming framework. And indeed, LIFE is marketed as if it were built with the EU’s framework in mind.
Positioning LIFE as a response to EU regulation may help endear it to institutional investors. Institutions prefer it when ETFs have clear rules.
It will be interesting to see what investors LIFE picks up.