Rapid climate change has long been a global problem. However, environmentalists are concerned that governments are not doing enough to combat global warming and promote decarbonization. In the financial market, climate-oriented mutual funds play a huge role in making a positive impact and routinely monitoring misconduct such as greenwashing.
Environmental problems such as cyclones, tornadoes, heat waves and rising sea levels have led to sustainable investments. In the first quarter of this year alone, investors around the world invested $ 178 billion in green mutual funds. The Biden government is already considering a carbon tax or regulations to encourage fossil fuel and electric power plant companies to cut carbon emissions. Rather than restrict investment in these industries, investors and governments should help them invest in technologies that will enable them to produce goods and services with minimal emissions of greenhouse gases.
In fact, several oil and gas companies are now investing in renewable energy. For example, BP, Shell, Chevron, Total, Eni and Exxon have pumped billions into clean energy projects. Shell plans to invest in a mix of solar, offshore and onshore wind projects to accelerate the transition to net zero emissions. Repsol is now involved in the WindFloat Atlantic floating wind farm.
With the Biden government’s ambitious climate goals, including halving greenhouse gas emissions by 2030, a carbon-free power grid by 2035, and creating a net-zero carbon nation by 2050, green investments are sure to be in the spotlight. The fate of the bill will be decided before the end of September and could open up opportunities for green investments.
Climate-oriented fund tracking will help investors avoid greenwashing companies. Investors can use tracking criteria such as low carbon, climate change or Paris oriented (in line with the goals of the Paris Agreement) to invest money in green companies and move away from companies with deteriorating environmental performance.
In addition, the Climate Investment Funds (CIF), the world’s largest multilateral fund testing and scaling climate solutions, is fighting the effects of climate change and accelerating the transition to a low-carbon economy. This $ 8.5 billion fund supports the transformation into clean technologies, access to energy, climate resilience and sustainable forests.
Fund houses such as Fidelity Investments are expanding their ESG or sustainable investment offerings. In early June, fund giant Fidelity added five actively managed ESG funds and offers investors and advisors 11 ESG mutual funds and ETFs. The three new actively managed investment funds are in particular the Fidelity Climate Action Fund (FCAEX), the Fidelity Environmental Bond Fund (FFEBX) and the Fidelity Sustainability US Equity Fund (FSEBX) with no minimum investment.
4 ESG fund selection
In light of these positive results, we have selected four mutual funds that focus on green or environmental investments and that have a Zacks Mutual Fund Rank # 1 (Strong Buy). Additionally, the minimum initial investment for these funds is within $ 5,000.
We expect that these funds will develop better than comparable funds in the future. Remember, the goal of the Zacks Mutual Fund Rank is to help investors identify potential winners and losers. Unlike most fund rating systems, the Zacks Mutual Fund Rank focuses not only on the fund’s past performance, but also on its likely future success.
The question here is why investors should consider mutual funds. Reduced transaction costs and portfolio diversification without the multiple commission fees associated with stock purchases are the top reasons for parking money with mutual funds (Read More: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
New alternative fund class A NALFX seeks long term capital growth with income as a secondary objective. He invests primarily in common stocks of companies and even in other equity securities like real estate funds and American Depository Receipts.
This Zacks – Other Product Sector has had positive total returns for more than 10 years. In particular, NALFX has three and five year returns of 29.3% and 19.6%, respectively. To see how this fund compares to its category and other 1 and 2 rated mutual funds, please click here.
NALFX has a Zacks Mutual Fund Rank # 1 and an annual expense ratio of 0.96% compared to the category average of 1.26%.
Janus Henderson Global Technology and Innovation Fund Class A. JATAX aims for long-term capital growth. The fund invests the majority of its net assets in the securities of companies that benefit from technological advances or improvements.
This sector tech product has had positive total returns for over 10 years. Specifically, the fund’s return over the past three and five years has been almost 30% and 30.8%, respectively. Click here to see how this fund compares to other mutual funds numbered 1 and 2 in its category.
JATAX has a Zacks Mutual Fund Rank # 1 and an annual expense ratio of 0.99% compared to the category average of 1.05%.
Calvert Global Energy Solutions fund class A. CGAEX aims to replicate the performance of the Calvert Global Energy Research Index. The fund invests the majority of its assets in companies whose main business area is sustainable energy solutions. The portfolio consists of companies that facilitate the transition to a more sustainable economy by reducing greenhouse gas emissions and expanding the use of renewable energy sources.
This Zacks Other Product Sector has had positive total returns for more than 10 years. CGAEX has three and five year returns of 25.1% and 18.3%, respectively. Click here to see how this fund performed compared to its category and other 1 and 2 rated mutual funds.
CGAEX has an annual expense ratio of 1.24%, which is below the category average of 1.26%.
Fidelity Select Utilities Portfolio FSUTX seeks capital growth. This nondiversified fund invests the majority of its assets in common stocks of companies that primarily operate in the utility industry and in companies that derive most of their income from utilities.
This Zacks sector utility has a history of positive total returns for over 10 years. Specifically, the FSUTX has returned 9.5% and 11.5% over the past three and five years. To see how this fund compares to its category and other 1 and 2 rated mutual funds, please click here.
FSUTX has an annual expense ratio of 0.76%, which is below the category average of 0.94%. This fund has significant investments in alternative energy companies such as Clearway Energy, Vistra Corp, Nextera Energy and Sunnova Energy.
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