The Veridien Climate Action ETF (NYSE Arca: CLIA) has begun trading on the New York Stock Exchange. The fund targets companies with technologies and business models that contribute to climate change mitigation.
CLIA will typically invest at least 80% of its net assets in companies making a substantial contribution to mitigating climate change. The fund is actively managed.
Ariane Mahler, CEO & CIO of fund issuer Veridien Global Investors, told ImpactAlpha that CLIA will include names in construction, waste management, agriculture, and forestry, as well as transportation and energy that “have as their main focus the reduction of greenhouse gas emissions.”
“Net zero is not going to get us anywhere,” Mahler said. “You need negative emissions, not just net zero.”
A 5-Step Process
As issuer and subadvisor, Veridien uses a five-step process to narrow down and select companies. From an initial universe of 10,000 candidates, Veridien targets companies engaging in a business activity that contributes to mitigating climate change.
Then, the subadvisor assesses the financials of each company that passes Step 1 to determine how much of its revenues, capital expenditures, and operating expenditures contribute to mitigating climate change. Next, Veridien analyzes each remaining candidate based on various qualitative and financial metrics.
For companies that have passed the initial steps, Veridien engages in a deeper analysis of the potential target company. From that, it derives a risk-adjusted target price using a proprietary valuation analysis.
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Finally, CLIA’s portfolio will include companies with risk-adjusted target prices significantly above their prices at the time of investment.
The fund’s portfolio will typically hold between 35 and 50 companies. The fund’s holdings of micro-cap stocks will usually represent less than 10% of the portfolio.
Veridien will evaluate CLIA’s portfolio continually. It will adjust the respective weights of companies in the portfolio based on the difference between the market price and risk-adjusted target price.
CLIA carries an expense ratio of 0.85%.
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