Evolve Funds has launched two new ETFs on Toronto Stock Exchange providing carbon-neutral exposure to mainstream Canadian and US large-cap equity indices.

CleanBeta ETFs provide exposure to mainstream equity indices while offsetting the carbon footprint by purchasing and retiring carbon credits.

The Evolve S&P/TSX 60 CleanBeta Fund (SIXT CN) has listed in Canadian dollars while the Evolve S&P 500 CleanBeta Fund is available in hedged Canadian dollar (FIVE CN), unhedged Canadian dollar (FIVE.B CN), and US dollar (FIVE.U CN) share classes.

SIXT tracks the S&P/TSX 60 Index, a reference for the 60 largest companies listed on TSX, while FIVE is linked to the bellwether S&P 500 Index comprising 500 of the largest firms listed on US stock exchanges.

Both indices are weighted by float-adjusted market capitalization.

In order to offset the ETFs’ carbon footprint, Evolve will purchase and retire a corresponding amount of carbon credits based on index emissions data provided by Trucost, a division of S&P Global.

Only carbon credits that satisfy strict verification standards of widely recognized voluntary offset programs will be eligible for purchase.

The ETFs may appeal to investors seeking alignment with a sustainable climate strategy while simultaneously maintaining the exact risk and return characteristics of the S&P/TSX 60 or S&P 500.

Raj Lala, President and CEO at Evolve Funds, said: “We’ve observed a number of challenges related to ESG investing adoption from inconsistent screening methodologies to a narrowing of the investable universe resulting in a change of the overall return profile. We think CleanBeta helps solve many of these issues by providing investors with a simple solution to make traditional indices carbon neutral.”

Aye Soe, Global Head of Product Management at S&P Dow Jones Indices, added: “As investors continue to stress the importance of indices that incorporate sustainability data and principles, we are always looking for new and innovative ways to bring choice to the market. We’re excited to work with Evolve in licensing the S&P/TSX 60 and S&P 500 for these new ETFs.”

Both ETFs come with management fees of 0.20% and administration fees of 0.15%.

Investors will also bear the cost of aligning their portfolios with carbon neutrality. According to the ETFs’ prospectus documents, the estimated cost of purchasing and retiring a sufficient amount of carbon credits was 0.17% for the Evolve S&P/TSX 60 CleanBeta Fund and 0.11% for the Evolve S&P 500 CleanBeta Fund (as of 31 March 2021).

Income is distributed on a quarterly basis.

Evolve has already stated its intention to expand the CleanBeta line-up in the near future with further carbon-neutral equity ETFs.