The 2022 United Nations Climate Change Conference, held in Sharm El-Sheikh, Egypt, just kicked off. The COP27 event's focus on cutting carbon footprints and on tackling climate change is well known -- indeed, the Glasgow Accord messaging from COP26 about restricting overall global warming to 1.5°C has been so strong that the recent string of food-based attacks on old masters' paintings can be tied directly to it.
But the event also covers a number of other topics, including food security and water security. Let's take a look at some funds that are tied to these focus areas -- such as the Consumer Staples Select Sector SPDR Fund (XLP) ; First Trust Nasdaq Food & Beverage ETF (FTXG) ; the Invesco Dynamic Food & Beverage ETF (PBJ) ; VanEck Agribusiness ETF (MOO) ; Invesco Water Resources ETF (PHO) ; First Trust Water ETF (FIW) ; Invesco Global Water ETF (PIO) ; and the Invesco S&P Global Water Index ETF (CGW) .
I've written about food-focused products before, and there are a couple of different ways to fill out a food allocation. The easiest play here is the Consumer Staples Select Sector SPDR Fund, which, as you can see in the table below, has been a choice for many investors given its asset size. While XLP does a good job capturing food names, it also has exposure to non-food and tobacco companies.
The other funds in the above table strip away the non-food exposures of XLP. In reviewing the methodologies for the indexes used to manage First Trust Nasdaq Food & Beverage ETF and the Invesco Dynamic Food & Beverage ETF, you will see both use a smart beta approach to either select or weight portfolio holdings and I believe this is reflected in the year to date results as of Friday.
FTXG and PBJ focus on food once it's been produced and packaged, but what about looking further down the vertical and getting exposure to those companies that provide the goods and services that help farmers cultivate and manage crops? That's where the VanEck Agribusiness ETF comes into play. This fund targets companies in the agribusiness arena, providing investors with exposure to companies that provide everything from seeds and fertilizers to farming equipment like Deer & Co (DE) , Kubota Corp (Local ticker 6326-JP) and Mosaic Co (MOS) and Darling Ingredients (DAR) . While the year-to-date returns for MOO have been faltering, you can see from the chart below that over longer periods the fund tends to outperform.
When it comes to water, there aren't a lot of ETF choices here, but, as you can see from the long-term chart below, water has been on investors' radar since the launch of the then Powershares Water Resources Portfolio, now Invesco Water Resources ETF in 2005, and the subsequent launch of the First Trust Water ETF and the global version of PHO, the Invesco Global Water ETF in 2007. Due to a quirk of corporate acquisitions, Invesco also picked up the Invesco S&P Global Water Index ETF through its acquisition of Guggenheim some years after acquiring Powershares, but for some reason decided to keep both funds in their product line. Back around the early 2010s, I managed the index used by FIW and it was interesting because strategist David Darst of Morgan Stanley would highlight water as a segment to pay attention to based on FIW's results, but because of Powershares' first mover advantage would end up using PHO as the fund in his recommendation. It wasn't until we put together a deck fully explaining ETF liquidity and campaigning hard that he started using FIW for both returns and investment recommendations.
Source: Factset, All You Can ETF
As you can see by the table below and the chart above, FIW has made up ground from an asset-gathering perspective and continues to outperform over the long term, as well.
Wrap It Up
With the recent wave of "anti-woke" fund launches, investors might be tempted to step away from cause-oriented portfolios. I'll remind investors that anti-woke is as much of a cause as so-called woke investing. Further, as you can see from these funds, you don't have to be woke to benefit from investing in the companies that provide basic food and water needs to the world. Step beyond the rhetoric and, if any of these funds seem interesting, then, put them on your investing radar.