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What are we looking for?

Canadian exchange-traded funds and mutual funds that invest in clean technology.

The screen

With Canada’s federal budget looming, Finance Minister Chrystia Freeland has already noted that her priorities will include investment into a “clean economy.” This, in combination with recent report from the United Nations Intergovernmental Panel on Climate Change, which further outlined that the world has reached a critical point in terms of action required to avoid catastrophic outcomes, might prompt investors to think about how their investments might stand to benefit (or lose) from the transition to a clean economy. If you are an index investor (which Morningstar believes is a great approach in efficient markets), the Canadian portion of your portfolio is likely quite heavily exposed to the energy sector, which will play a pivotal role in the transition, but perhaps with unclear outcomes for investors. With this idea in mind, I thought to highlight funds that invest in the transition by screening for ETFs and D-class mutual funds (those that are available through discount brokerages without the imbedded cost of advice) indicated as “climate action” funds, according to Morningstar’s Sustainable Attributes Framework. In other words, these are funds that have indicated in their prospectus filing that they invest thematically in companies or projects that contribute broadly to the transition to a low-carbon economy (such as wind, solar, hydro, tidal and geothermal power, and those focused on green infrastructure and energy storage).

What we found

Nine low-volatility clean tech funds and ETFs

NameMER (%)Morningstar CategoryMorningstar Rating for FundsMorningstar Quantitative RatingTotal Ret YTD (%)Total Ret 1 Yr (%)Total Ret Annlzd 3 Yr (%)Total Ret Annlzd 5 Yr (%)Inception Date
First Trust Nasdaq Clean Edge GreenEyETFQCLN-T0.77Canada Fund Global Small/Mid Cap EquityBronze8.69-10.506.21-3.9810/29/2014
BMO Clean Energy ETFZCLN-T0.40Canada Fund Global Small/Mid Cap EquityGold-2.091.321/26/2021
Harvest Clean Energy ETF Class A unitsHCLN-T0.69Canada Fund Global Small/Mid Cap EquityNeutral-3.94-11.921/11/2021
Dynamic Active Energy Evolution ETFDXET-T0.98Canada Fund Energy EquitySilver-3.95-14.226/15/2021
CIBC Clean Energy Index ETFCCLN-T0.38Canada Fund North American EquityBronze-0.19-18.6611/16/2021
Desjardins SocieTerra Cleantech D1.44Canada Fund Global Small/Mid Cap Equity4 StarsSilver5.77-2.1720.185/11/2018
Mackenzie Grnchp Glbl Envr All Cap D1.61Canada Fund Global Small/Mid Cap Equity5 StarsNeutral6.805.0529.2210/17/2018
Mackenzie Greenchip Global Envr Bal D1.55Canada Fund Global Neutral BalancedNeutral5.152.214/9/2021

Source: Morningstar Direct

Data as of March 22

The funds that meet the above requirements are listed in the table, alongside their tickers, management expense ratios, categories, ratings and returns. I note importantly that the table includes two distinct ratings – the Morningstar Rating for Funds, which is an objective lookback at a fund’s after-fee risk-adjusted performance against the category to which it belongs; and the Morningstar Quantitative Rating, which is Morningstar’s assessment of a fund’s ability to produce above-average returns in the future, based on our analysis of people (quality of the management team), parent (stewardship of the fund company), and process (robustness of investment decision-making).

This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

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