Global X launches green real estate ETF

Apr 15th, 2022 | By | Category: Alternatives / Multi-Asset

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New York-based Global X has launched a new thematic equity ETF delivering access to companies developing, managing, or providing technology and materials to environmentally friendly buildings.

green buildings ESG real estate

Green buildings typically have significantly smaller carbon footprints as well as less wastage of water and energy.

The Global X Green Building ETF (GRNR US) has been listed on Nasdaq with an expense ratio of 0.45%.

Green buildings are properties that, in their design, construction, and operation, reduce or eliminate negative impacts and create positive impacts on the environment and the health of their inhabitants.

There are a number of features that make a building ‘green’ including efficient use of resources, less wastage of water and energy, reduced pollution, and the use of materials that are non-toxic, ethical, and sustainable.

With the World Economic Forum estimating that the real estate sector is responsible for up to 38% of energy-related carbon emissions globally, the mass rollout of green buildings has been touted as a potential gamechanger in the battle against climate change.

Demand for more comfortable and sustainable living is also expected to rise dramatically in the coming decades as cities become increasingly crowded – over two-thirds (68%) of an estimated global population of 9.7 billion people are expected to live in urban areas by 2050.

According to Global X, the combination of these trends is setting the stage for a multi-decade structural growth opportunity in the green buildings sector.

Pedro Palandrani, Director of Research at Global X, said: “The green building sector represents a multi-trillion-dollar opportunity designed to meet the rapidly increasing demand for buildings while reducing greenhouse gas emissions and boosting climate resiliency.

“We expect green buildings to continue to gain market share due to increasing demand for sustainable solutions and new regulations. I’m thrilled that Global X is leveraging its thematic expertise to provide investors with access to companies involved in several business activities related to green buildings.”

Methodology

The fund is linked to the Solactive Green Building Index which selects its constituents from a universe of stocks listed in developed markets and most emerging markets, excluding India, Pakistan, and Russia. Chinese A-shares are up for inclusion only if they are available through the Stock Connect program.

The methodology harnesses the capabilities of ESG analytics firm Sustainalytics to screen for companies deriving at least 50% of their revenue from three industry segments related to green buildings: Development; Management; and Technologies & Materials.

The Development segment covers companies that design, construct, redevelop, or retrofit properties that meet reputable green building certification standards. Green building certification indicates that a building has met robust environmental, energy, and human health standards.

The Management segment covers companies operating and managing properties with official green building certification.

The Technologies & Materials segment covers firms providing products and services that increase the energy efficiency of residential, commercial, or public buildings. Types of products and services include insulation and building envelopes, energy management services, and automatic controls for heating and lighting.

To be eligible for selection, a company must also have a market capitalization above $200 million and an average daily trading volume greater than $2m.

Constituents are weighted by float-adjusted market capitalization subject to a cap and floor of 4% and 0.3%, respectively. The index is reconstituted and rebalanced on a semi-annual basis.

As of the end of March, stocks listed in Japan and the US each accounted for a fifth of the index weight with the next-largest country exposures being France (11.3%), China (9.8%), and Singapore (8.1%).

There were 74 constituents in the index with the largest positions being China Overseas Land & Investment (4.2%), Boston Properties (3.9%), Legrand SA (3.8%), Kone OYJ (3.8%), and Carrier Global (3.8%).

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