GBUY A strong idea for net zero corporate exposure
There is no shortage of companies pledging to reduce their carbon emissions and announcing zero emissions targets. At a sector level, many of these companies reside in the energy and utilities sectors, which makes sense given the large carbon footprints found in these groups.
However, other sectors are full of companies with ambitious net zero goals, which creates some interesting surprises in terms of exchange-traded funds. The Goldman Sachs Future Consumer Equity ETFs (GBACHT) is an example of an industry ETFs with more net zero credibility than meets the eye.
As indicated by his name, GBACHT is a new approach to investing in consumer-related stocks. On a related note, the fund is not a dedicated consumer discretionary fund. ETFsbut it allocates 26.2% of its weighting to this sector and an additional 4.2% to consumer staples, giving investors solid exposure to net-zero targets through consumer goods companies.
“Surprisingly, some of the largest net zero commitments have been made by consumer goods companies, such as PepsiCo (DYNAMISM), L’Oreal (LRLCF) and General Mills (GIS). According to data collected by the NetZero Tracker global initiative to increase transparency and accountability around net zero goals – about half of the world’s top 2,000 companies by revenue have committed to a science-based long-term goal to reduce their carbon emissions to net zero,” wrote Diana Radu, analyst at Morningstar.
These particular names are not GBACHT members, but the ETFs holds shares comparable to L’Oréal, indicating that the fund is relevant when dealing with a combination of consumer goods companies and net zero goals. In fact, when it comes to net zero goals, consumer staples and consumer cyclical companies rank third and fourth, respectively.
“A whopping 85% to 95% of consumer goods company emissions are classified as Scope 3, the reduction of which depends on the actions of suppliers and consumers,” Radu added. “Consequently, consumer goods companies will need to direct their efforts towards engaging with suppliers and ensuring they meet the same high environmental standards, as well as helping consumers reduce emissions associated with the use and product disposal.”
On that note, GBUY is almost 7% weight at Amazon (NASDAQ:AMZN) is highly relevant, as this company has the power to enforce zero emissions standards among suppliers or, at the very least, ask suppliers to make improvements on this front. Additionally, due to its high exposure to last mile (parcel delivery), Amazon may affect a large net zero change by switching to electric vehicles.
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