Invesco has launched a sustainability-focused real estate ETF that invests in companies specializing in ‘green buildings’.
The fund provides thematic exposure to companies specializing in green buildings.
Listed on NYSE Arca, the Invesco MSCI Green Building ETF (GBLD US) comes with an expense ratio of 0.39% and is the first to track the MSCI Global Green Building Index.
According to research from the United Nations Environment Programme, buildings and related construction contributed 38% of global carbon emissions in 2019, highlighting the importance of the real estate sector in combating climate change.
Green buildings are environmentally responsible and resource-efficient throughout their life-cycle including planning, design, construction, operation, maintenance, renovation, and demolition. And they typically make use of innovative technologies such as artificial intelligence to significantly reduce their environmental impact through lower energy consumption.
As such, green buildings have the potential to play a crucial role in limiting global warming.
John Hoffman, Head of Americas, ETFs and Indexed strategies at Invesco, said: “The Invesco MSCI Green Building ETF will be the first to focus specifically on the entire green building ecosystem, continuing Invesco’s track record as an ETF industry pioneer. GBLD provides access to not just sustainable real estate, but companies involved in every stage of construction, redevelopment, and retrofitting green-certified properties. GBLD is a great addition to our thematic environmental ETF suite, offering investors a new way to align their investments with their personal values.”
Christine Berg, Managing Director and Head of Americas Index Coverage at MSCI, added: “We are excited that Invesco has chosen the MSCI Global Green Building Index to expand its thematic ESG suite. The MSCI Global Green Building Index comprises of leaders that have higher energy efficiency, healthier indoor environmental quality, and environmentally friendlier construction materials. The MSCI Global Green Building Index is comprised of companies whose offerings conserve natural resources, are made with recycled waste, avoid toxic emissions, save water and energy or contribute to a safe, healthy built environment.”
Methodology
The underlying MSCI Global Green Building Index is derived from the parent MSCI ACWI IMI universe which covers stocks from all market capitalizations across both developed and emerging markets.
The index includes companies that derive at least 50% of their revenue from operations linked to green buildings.
According to MSCI, the green building theme addresses products and services across the entire sustainable building value chain. Products may include raw materials, energy efficiency, manufacturing processes, the toxicity of a product during installation and use, and resource recovery, while services encompass consulting, design, engineering, construction, project management, real estate investment trusts (REITs), financing, and third-party certification.
To be eligible for inclusion, a constituent must also have a confirmed commitment to sustainable building standards for all new construction.
Constituents are weighted by float-adjusted market capitalization, and the index is reconstituted on a semi-annual basis and rebalanced quarterly. In a bid to reduce turnover, existing constituents will only be removed if their share of ‘green’ revenue falls below 40%.
At the end of March, there were 73 constituents in the index. Stocks from the US and Japan each accounted for approximately one-quarter of the index by weight with the next-largest country exposures being France (11.1%), Singapore (11.1%), and Australia (5.6%).
The vast majority (92.9%) of the index was allocated to real estate stocks, with stocks from the consumer discretionary sector making up the difference at 7.1%. Notable positions included Boston Properties (6.1%), Unibail-Rodamco-Westfield (4.5%), Nippon Building Fund (3.6%), Japan Real Estate Investment (3.2%), and Berkeley Group (3.2%).