Short-term thinking often creeps into various market segments, but investors exploiting climate change strategies should play the long game.
Among exchange-traded funds, Goldman Sachs Future Planet Equity ETF (GSFP) facilitates the achievement of the long-term climate investment objective. One of the reasons the GSFP is an ideal pathway for climate-focused investments is that it focuses on companies working on services and technologies that reduce greenhouse gas emissions.
“Climate change, or global warming due to greenhouse gas (GHG) emissions caused primarily by human activity, poses a substantial danger to businesses and economies, human health and the natural environment,” according to a Fidelity study.
Certainly, GSFP, which debuted last July, has both short-term and long-term merits. In the long term, companies and governments could commit trillions of dollars to reducing greenhouse gas emissions and fighting climate change. In the short term, these entities are starting to embark on these initiatives, and this pressure is widespread, coming from customers, investors and regulators. Meeting these demands has investment implications.
“We also see significant short- and long-term investment opportunity and potential for portfolio risk mitigation as global markets and investors allocate capital and resources to innovative research and development efforts and companies. that catalyze change,” adds Fidelity.
Added to GSFP’s long-term thesis is the fact that some companies are showing a desire to be allies in the fight against climate change. Some even set up new businesses for this purpose. Such initiatives could expand the total addressable market served by GSFP member companies.
“Companies are changing or even creating new business models to reduce GHG emissions, including those working to ‘green the grid’, decarbonize heavy industry and bring in new technologies to remove carbon from the atmosphere. , among many other trends,” notes Fidelity.
Another point in favor of the GSFP is that the Goldman Sachs ETF is actively managed – a style of management that could be effective in a still nascent investment concept, which is climate change investing. As an active fund, GSFP can better respond to emerging trends in climate-sensitive investing while avoiding controversies, such as greenwashing. Add to that, it’s clear that GSFP is tapping into a megatrend.
“Climate change is a global issue that will affect every country, industry, sector and business. In our view, this green transition is still in its infancy, but it is likely a mega-investment trend where economic progress over the next century could be defined by climate investments,” concludes Fidelity.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.