Impact of climate change and low-carbon transition on the choice of ETFs

Dear all,

Following your different advices and an attentive reading, as all of you, I choose to invest in passive ETFs such as Vanguard.

However, time goes by and I observe an increased political interest in low-carbon transitions, with following regulatory policies. I also see an increased attention from media to the different catastrophic events happening globally, and pessimistic scientific predictions concerning their future occurrence.

I saw that passive index funds are slowly emerging, weighting industries and sectors according to their compliance to a low-carbon policy. These funds are still recent and have low asset under managements, but they are still diversified both among countries and sectors, and have a low TER (0.20). I start to anticipate upcoming regulations and sectors that could benefits from climate change.

To my opinion, and according to their size and tracking index (most of ETFs are young and small), I would prefer:

  • Lyxor MSCI World Climate Change (DR) UCITS ETF - Acc
  • Lyxor Net Zero 2050 S&P Eurozone Climate PAB (DR) UCITS ETF - Acc

Do you have any opinion about these ETFs ? Or would do you have other preferences ?

PS : I declare no conflict of interests.

What are you trying to achieve? Feeling better with your investment (like ESG) or timing the market?

(What makes you think the market didn’t already price the coming regulatory changes?)

Thanks for these secondary questions. It is indeed necessary to precise my objective, which is not to feel better, but which is closer to time the market & diversify my portefolio.

Most of indexes traditionally used do not consider ESG / carbon emissions in their methodology when including & weighting industries, which might need to rapidly transition if we face political regulation. After, I observed that representation of energy sector in major funds (Vanguard / SMIM-UBS) is pretty low/inexistant and industries included might not be the most impacted (informatics/healthcare).

Not being an expert in finances nor in environment, I am just asking for general opinion to more experimented investors on the potential threat resulting from such future regulation for traditional index funds and the usefulness of such emerging “climate friendly” ETFs to time the market & diversify our portefolio,


Instead of thinking “this is going to go up”, when timing the market you should think, “what do I know that others don’t”.

If you can’t answer that, you’re likely better off staying with the default market cap weighted allocation :slight_smile:

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