From: Issue 38

Are Sustainable ETF's Ready for Prime Time?

Page 2 of 2

23 February, 2012

Written by Rob Carrick, Contributor

Investors with a high tolerance for risk – losing money, in other words – might consider a pair of what might be described as honorary SRI ETFs. One is the PowerShares Cleantech Portfolio (PZD), which is based on an index designed to track leading clean technology companies. The other is the PowerShares WilderHill Clean Energy Portfolio (PBW), which invests in companies in the business of developing green and renewable energy sources.

The quickest way to gauge the popularity of an exchange-traded fund is to look at its daily trading volumes. From this point of view, only the PowerShares WilderHill Clean Energy Portfolio can be said to have gained a significant following among investors. The others, including the TSX-listed Jantzi ETF, generate what would be considered low volumes that on a typical day could be as low as a few thousand or even a few hundred shares.

Ironically, it’s the PowerShares WilderHill Clean Energy Portfolio that has by far the worst performance of any socially responsible ETF. Over the five years to early December, it lost a staggering 70 per cent of its value on a cumulative basis. As for the largely overlooked KLD 400 and ESG Select Social ETFs, they have both consistently outperformed the S&P 500 index, which is the benchmark for the U.S. stock market.

PUR Investing’s Yamada credits the mutual fund industry with doing an effective job of teaching consumers that the fund world offers many options for socially responsible investors. ETF providers have taken the approach of letting SRI investors come to them, which has not proven as effective.

Yamada thinks this could be a generational issue. He said baby boomers have the most money to invest, but they have shown a modest level of interest in socially responsible investing.

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 Launched in 2005, the Global 100 annual clean capitalism ranking is announced each year during the World Economic Forum in Davos. Check out the below to see the 2012 list and gain insight with related editorial; visit global100.org to learn more about what and who is behind the annual ranking.