For generations, real estate wasn’t considered an environmentally aware industry. Some may have even doubted its environmental friendliness.
Today, with environmental, social, and governance (ESG) investing gaining momentum, some real estate investment trusts (REITs) and fund issuers are sensing opportunity. Enter the Invesco MSCI Green Building ETF (GBLD), the first exchange traded fund dedicated to real estate firms that emphasize climate awareness.
GBLD debuted in April and follows the MSCI Global Green Building Index. Among GBLD’s 83 holdings are companies engaged in the design, construction, acquisition, and other aspects of green properties and structures. GBLD’s underlying index is part of MSCI’s suite of global environment benchmarks.
“The Indexes are free float-adjusted market capitalization weighted indexes designed to maximize exposure to Clean Technology environmental themes. Securities of companies in the indexes derive at least 50% of their revenues from products and services from Alternative Energy, Sustainable Water, Green Building, Pollution Prevention and Energy Efficiency,” according to the index provider.
GBLD's Global Approach Matters
GBLD is a global fund, and that’s relevant to investors because the green building movement isn’t a theme confined to U.S. borders.
“Developers in Asia-Pacific are expected to accelerate their pace of constructing eco-friendly buildings as they take measures to mitigate the impact of climate change and meet rising demand for green office space, according to industry observers,” reports The South China Morning Post.
The green building movement in the Asia-Pacific region is an important part of the GBLD thesis because the Invesco fund allocates over 36% of its weight to Japan and Hong Kong, while Singapore and Australia combine for another 11%. China checks in at 1.48%.
Another important fact for investors considering GBLD: Demand is so intense for green buildings that it’s outpacing supply. As a result, green building landlords can charge more rent.
“The growing demand for an eco-friendly environment has been further driven by concerns about climate change and the Covid-19 pandemic, which has given rise to the desire for clean and comfortable indoor living and work environments,” according to the South China Morning Post.
The average market capitalization of GBLD member firms is $10.62 billion. More than half its holdings are classified as value stocks, and the fund does an admirable job of not relying on large-cap stocks, as about 73% of its holdings dwell in mid- or small-cap territory.
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