The passively-managed ETFB Green SRI REITs ETF (RITA) launched on NYSE Arca yesterday. The fund tracks and the index is composed of a portfolio of exchange-listed real estate investment trusts (“REITs”) in developed markets meeting the business, financial, socially responsible investing (“SRI”) criteria, and a number of green investing criteria. It screens out real estate operators that generate greater than 5% of their revenues from tenants that violate Islamic laws or do not have accreditations from a third-party environmental certification group.
The SRI screening is consistent with Shariah principals, and eligible REITS are eliminated if they earn more than 5% of their business from alcohol, firearms, music, radio, stem cells, tobacco, weapons, cinema, television, pork, gambling, adult entertainment, or conventional financial services.
According to the prospectus, “data regarding each company’s Green Certifications and Energy Usage (described below) is normalized cross-sectionally to create a score for each REIT, which score is then used to adjust (tilt) the constituents’ weights towards REITs with higher green scores (i.e., higher levels of Green Certifications and more favorable Energy Usage).”
Efficient buildings are becoming more popular, and RITA’s unique take on the ESG space can help some environmentally conscious investors gain exposure to REITs, which are known for their generous dividends. REITs have the extra advantage of being good inflation hedges, as real estate can respond to and track inflation rapidly, increasing rents for tenants and allowing for the income generated to meet the demands of inflation.
RITA launches with an expense ratio of 0.50%.
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