Low cost fossil-free GBP ETFs

[HuckleberrySawyer]

Hi,
New poster here.
I have a SIPP with Interactive Investor, and mostly hold simple index tracking ETFs.

I'd like to be able to track fossil-free versions of major indexes (say fossil-free FTSE 100, or S&P 500) - does anyone know of any GBP ETFs that would track the constituents of the FTSE omitting the big oil/gas/coal etc. companies that I can put in my SIPP?

(I find it hard to search in Interactive Investor's stock/fund screens for the things I might want. Reading online I've found cheap US ETFs like SPYX, but I can't put them in my SIPP because II doesn't have the KIID documents, etc.)

Many thanks!

[gryffron]

Hello, and welcome.

There are various "ethical" funds to look at. The problem of course is what exactly do you consider UNethical. Oil, Miners (which miners?), Energy Utilities, Weapons, Tobacco,...? Since they all have different ethics, they all have different constituents.

There are also several "green energy" funds. Discussed here. Maybe they are the solution to your problem. If you think oil is going down, then green energy will likely go up. A small holding in one of those could offset the oil in your general trackers.

Gryff

[HuckleberrySawyer]

Hello, and welcome.
There are also several "green energy" funds. A small holding in one of those could offset the oil in your general trackers.
Gryff

Hi Gryff,
Thanks very much for the reply.
I guess I could invest in a green fund, although I'm not sure about the offsetting viewpoint. If I hold a plain FTSE tracker including all the fossil fuel companies, then if I think at some point in the future fossil fuel stocks will plummet (for instance if they're overtaken by green technology/legislation etc.), the index tracker will drop too. I'd prefer not to hold those companies' shares in the first place, both from an ethical point of view, and in the expectation that they are the very opposite of growth stocks - i.e. I expect to lose money on them.
Even if you don't have an ethical stance on carbon and the environment, most investors definitely have a view on whether they want to hold shares that are only going to go down in the long term.
There are fossil-free index trackers in the US, but none that I can see so far in the UK that I can pick in my SIPP.

[mc2fool]

iShares home page is currently highlighting their sustainable ETFs. I haven't dug deeper to see if they'd likely fit your bill, but you can do so ... https://www.ishares.com/uk

[HuckleberrySawyer]

iShares home page is currently highlighting their sustainable ETFs. I haven't dug deeper to see if they'd likely fit your bill, but you can do so ...

Hi,
Thanks for the link. They (Blackrock/iShares) have 55 ETFs that have some sustainability/SRI element to them, but only 2 in GBP.

The SASI iShares MSCI USA ESG Screened UCITS ETF USD (Acc) one "Screens out exposure to Controversial Weapons, Nuclear Weapons, Tobacco, Thermal Coal, Oil Sands, UN Global Compact violators and Civilian Firearms", has a low charge of 0.07%, and seems to be SIPP compliant, so that's a start. They only filter out thermal coal and oil sands, but it's better than nothing I guess.

It might take time, but as Blackrock have said they'll expand their ETF offerings in view of the climate stance, I'm hoping I can invest in a simple "FTSE 250 ex-Fossil Fuel" or "S&P Fossil Free" style tracker. And then maybe other providers like Vanguard, Fidelity, etc. will follow with more UK-friendly trackers that don't cost the earth.

Cheers.

[gryffron]

Hi Huck,

I still don't think that what you are asking for is nearly as simple as you think. You said "fossil free", so for example:

Most of the big miners have some coal. Do you rule them all out? If no, then at what percentage/tonnage? Is strip mining for products other than coal acceptable?
What about chemical companies? Many of them use oil derivatives.
Airlines? Tourist operators?
Car manufacturers?
Gas distributors?
Power station operators?

Good luck. I hope you can find something which suits you. But any such ethical approach is subjective, and much more complicated than ruling out a couple of big oil producers.

Gryff

[mc2fool]

It is perhaps surprising that the sort of ETFs you're looking for aren't already available (if, indeed, it's not a case of not having looked hard enough), given the sentiment around fossil fuels and the drift affecting even mega funds like (ironically) the Norwegian sovereign wealth fund to divest from oil & gas.

Perhaps you might try looking in the active sector instead. The go-to fund manager for that sort of thing used to be EdenTree, formally known as Ecclesiastical Investment Management and, yes, originally started as the Church of England's fund manager. They were always credited as having respectable, although rarely top-of-class, performance, usually 2nd quartile, but I haven't looked at them for many years.....

https://en.wikipedia.org/wiki/EdenTree
https://www.edentreeim.com/

[HuckleberrySawyer]

Hi Huck,

I still don't think that what you are asking for is nearly as simple as you think. You said "fossil free", so for example:

Most of the big miners have some coal. Do you rule them all out? If no, then at what percentage/tonnage? Is strip mining for products other than coal acceptable?
What about chemical companies? Many of them use oil derivatives.
Airlines? Tourist operators?
Car manufacturers?
Gas distributors?
Power station operators?

Good luck. I hope you can find something which suits you. But any such ethical approach is subjective, and much more complicated than ruling out a couple of big oil producers.

Gryff

Hi Gryff,
Yes, I know what you mean. It's a "how long is a piece of string" type question - at present almost everyone uses fossil fuels in some shape or form. It's just that considering there are already indices (however imperfect) that have ready-to-buy tracker ETFs in the US at least, and they do exclude some of the more obvious fossil-fuel companies (i.e. oil, coal, etc.), I'd like something similar here.
Thanks!

[HuckleberrySawyer]

It is perhaps surprising that the sort of ETFs you're looking for aren't already available (if, indeed, it's not a case of not having looked hard enough), given the sentiment around fossil fuels and the drift affecting even mega funds like (ironically) the Norwegian sovereign wealth fund to divest from oil & gas.

Hi,
Well, they exist, just not for UK investors yet in the way I'd expect. At least for now. Perhaps it'll take time, or perhaps I am in such a minority of potential customers (a cheapskate looking for a low-cost GBP ETF to track a fossil-free index) no-one wants to cater for me!

[SDN123]

If I hold a plain FTSE tracker including all the fossil fuel companies, then if I think at some point in the future fossil fuel stocks will plummet (for instance if they're overtaken by green...

If you just buy a FSTE 100 tracker and...
- the fossil fuel companies fall then they will fall out of the FTSE 100 and be replaced by more valuable shares - exactly the most valuable in the markets view at that time;
- If green energy takes off, and the companies are not bought out by the current fossil companies, then they will come into the FTSE 100 (and the fossil companies will stay or go);
- If green energy takes off, and the companies are bought out by the current fossil companies, then the fossil companies will stay in the FTSE 100.

To cover all of these possibilities... buy the FTSE 100 and then leave it alone.

Keep It Simple is often the winner in hindsight

[ukfire]

iShares home page is currently highlighting their sustainable ETFs. I haven't dug deeper to see if they'd likely fit your bill, but you can do so ...

Hi,
Thanks for the link. They (Blackrock/iShares) have 55 ETFs that have some sustainability/SRI element to them, but only 2 in GBP.

The SASI iShares MSCI USA ESG Screened UCITS ETF USD (Acc) one "Screens out exposure to Controversial Weapons, Nuclear Weapons, Tobacco, Thermal Coal, Oil Sands, UN Global Compact violators and Civilian Firearms", has a low charge of 0.07%, and seems to be SIPP compliant, so that's a start. They only filter out thermal coal and oil sands, but it's better than nothing I guess.

It might take time, but as Blackrock have said they'll expand their ETF offerings in view of the climate stance, I'm hoping I can invest in a simple "FTSE 250 ex-Fossil Fuel" or "S&P Fossil Free" style tracker. And then maybe other providers like Vanguard, Fidelity, etc. will follow with more UK-friendly trackers that don't cost the earth.

Cheers.

Many of the SRI/ESG funds tracking the MSCI indices, whilst priced in USD/EUR, are quoted on the LSE in GBP. At least the SRI accumulation versions of USA, EM, Europe, Japan. Not the dist class and strangely not the MSCI World SRI ETF.

UBS do have GBP priced SRI ETFs but slightly higher charges and domiciled in Lux most of the time.

For the UK, L&G's Ethical Fund is worth looking at, very concentrated in UK financials.