Does NZAC’s Climate Change Focus Give It the Edge Over IEMG?

Both the State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) and iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) target global equity exposure, but their approaches diverge: NZAC aims to align with climate goals across developed and emerging markets, while IEMG focuses on emerging-market equities. This comparison examines their cost, performance, risk, sector tilts, and structural quirks to help investors decide which may better fit their portfolio goals.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

IEMG outperforms NZAC in yield and one-year return, has lower expenses, and has more substantial assets under management (AUM).

IEMG holds 2707 emerging-market stocks, with its primary focus on the tech sector (23%), followed by financials (16%) and industrials (12%). Its top holdings are Taiwan Semiconductor Manufacturing (2330.SR), Samsung Electronics Ltd (005930.KS), and Tencent Holdings Ltd (0700.HK), giving it more exposure to Asian tech giants.

NZAC targets companies that meet climate-aligned criteria, providing investors with exposure to efforts to reduce climate risks. It holds 729 stocks, with technology accounting for 32% of assets, followed by financial services (16%) and industrials (10%). Key holdings such as Nvidia(NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) highlight its U.S. tech tilt. The fund has been in operation for over 11 years and incorporates an ESG screen, which evaluates which companies align with relevant sustainability themes and are selected for the fund.

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IEMG seems to have better performance in various performance measures compared to NZAC, but that doesn’t mean the sustainability-focused ETF doesn’t have value. With various countries around the world progressing toward the pledges they made in the Paris Agreement. And as demand for climate change efforts worldwide increases, companies that have not yet passed the ESG screening may eventually meet the criteria to keep up.

One advantage that NZAC could potentially have over IEMG is its weaker international influence. For U.S. investors, that can be beneficial if they’re not familiar with international assets, as they are often more volatile and move significantly different from U.S. stocks.

While NZAC does have foreign assets, its top U.S. holdings currently hold enough weight to not be too impacted if a major foreign event were to occur in Asia and/or Europe. But for overall global tech exposure, both funds aren’t bad options.

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Adé Hennis has positions in Apple and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Does NZAC’s Climate Change Focus Give It the Edge Over IEMG? was originally published by The Motley Fool