Big excitement from ETF manager Rize ETF this week as it lists its Circular Economy Enables UCITS on the London Stock Exchange. The fund, which is also going live in Frankfurt (Xetra) is the first Article 9 sustainable thematic ETF that is aimed at listed companies which are playing a role in building the circular economy.
Circular economy enablers are defined here as companies that are helping the world to make that transition. A good example would be Origin Materials [NasdaqCM:ORGN]. How one defines the circular economy, and which companies are pushing it forward, is a little trickier. Rize ETF is being guided by the SMS Circular Economy Enablers Thematic Classification and further output from the European Commission.
A circular economy aims to break the current linear economic cycle by prioritising waste prevention and the continuous use of resources. Transitioning to a circular economy, directly addresses the challenges of resource scarcity, environmental degradation and climate change.
Rize ETF feels that the new fund is pretty unique at the moment in the European market. It aligns itself with the nine ‘R’ Strategies and Principles Hierarchy of the Circular Economy. The company is arguing that this theme represents a major departure from the wasteful linear economy model of ‘take-make-waste’ where resources are extracted, turned into products, and finally thrown away. It is considered to be an innately polluting economic model which degrades natural systems over time.
A circular economic model redefines production and consumption around principles of designing out waste and pollution and keeping products and materials in use for as long as possible. This helps to support a regenerative approach to resource management.
Xtrackers launches Nordic Paris Climate ETF
Not to be outdone, fund manager Xtrackers has launched a Nordic equity markets ETF – Nordic Net Zero Pathway Paris Aligned UCITS – which uses an index methodology that it has already successfully used with some other ETF launches, including for the Japanese and US equity markets. The index complies with the EU Paris Aligned Benchmark regulations.
Xtrackers says the launch – which is going live with over EUR 100m committed from institutional investors – reflects the demand for climate-focused exposure exhibited by investors in the region. The fund manager has worked with some major names in the Nordic pensions field to develop the latest offering. The index provides a 50% reduction in carbon intensity when compared to the corresponding non-ESG market benchmark, and a 7% year on year ongoing decarbonisation pathway.
State Street Global Advisors looking at ETF tokenisation
State Street Global Advisors, one of the bigger ETF fund managers, has said it will be looking at the tokenisation of ETFs, which it thinks will be a game changer. The remarks were made by Matteo Andreetto, at a recent ETF industry conference. He told delegates he thinks that blockchain and the further digitisation of assets could have far-reaching consequences for the ETF industry.
Andreetto said State Street is already looking at the tokenisation of ETFs and after that the tokenisation of private assets. State Street has also been fielding inquiries from larger investors about the prospects for cryptocurrency ETPs, although this is not currently high on the agenda.
