As Canadian companies begin to set targets on how they can help reduce greenhouse gases, Evolve Funds Group Inc. is aiming to launch one of the country’s first investment funds that will offset the carbon footprint of North America’s primary stock indices.
Evolve announced on Tuesday it has filed with the Ontario Securities Commission to launch a set of “CleanBeta” exchange-traded funds that will trade on the Toronto Stock Exchange under the symbols SIXT and FIVE.
The Evolve S&P/TSX 60 CleanBeta fund (SIXT) and the Evolve S&P 500 CleanBeta fund (FIVE) will track the performance of S&P/TSX 60 and S&P 500 indices, respectively, while striving to offset the carbon footprint of the companies in the portfolios.
“Carbon dioxide is the primary contributor to our world’s greenhouse gases. Investors are now demanding that countries and companies work to reduce these emissions, however, this cannot take place overnight,” Evolve chief executive officer Raj Lala said in a statement.
“Currently, trying to invest in only carbon neutral companies results in a significant narrowing of the investable universe. Our [funds] deliver commonly used traditional indices and strive to offset the carbon emissions from these companies, in order to deliver a clean beta solution.”
The collaboration with the S&P/TSX 60 is rare for a retail Canadian ETF, Mr. Lala said.
“As an independent index provider our goal is to provide investor choice in the market and we are attracted to any opportunities that provide new innovative ways to implement passive index strategies,” said Michael Orzano, senior director of global equity indices at S&P Dow Jones Indices. “This provides yet another choice for market participants to gain core equity exposure in both Canada and the U.S.”
If the funds are approved, Evolve intends to offset the carbon in both portfolios by using a carbon footprint calculation provided by S&P Dow Jones called Trucost, which uses data to determine the carbon exposure of the companies in each index.
Evolve will then employ a variety of strategies, such as purchasing and retiring carbon credits, as a means to neutralize the full carbon footprints.
For example, based on estimates of the carbon footprint of the S&P/TSX 60, Trucost anticipates the fund will pay about US$20 per tonne of carbon, which translates into approximately 0.17 per cent of net assets.
Amy West, global head of TD Securities’ sustainable finance and corporate transitions group, said the use of carbon offset and carbon removal credits in investment products is an encouraging sign to help assist in the transition to net zero by 2050.
“It is going to be important that we are tackling greenhouse gas emissions head on, and part of how we do that can be done two ways,” Ms. West said in an interview. “Companies can lower their GHG emissions though operational improvements, but the rapid development of carbon offsetting and carbon removal markets as part of that plan is going to have a pretty big role to play as well.”
Individual investors are also driving the conversation for more carbon-neutral products, said Charlie Spiring, chairman of Wellington-Altus Holdings Inc., an independent wealth manager with about $15-billion in assets.
“Advisers are paying closer attention to carbon-neutral products as clients are increasing the demand for green investing,“ Mr. Spiring said. “The last five years haven’t really given us a lot of great solutions. Some are expensive and some are modest stocks that push the button but [carbon offsets] can easily allow investors to clear their conscience as they align their interests with their beliefs.”
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