In honor of Earth Day, Morningstar is taking a look at what it calls "sustainable sector funds," or investments related to opportunities "like renewable energy, energy efficiency, environmental services and water." While acknowledging the limited ranges of stocks to choose from, of the 38 funds in the firm's universe, it decided to highlight a group of seven funds focused on environmental concerns.
Of those seven, three are specifically focused on water: AllianzGI Global Water (AWTPX), Invesco Water Resources ETF (PHO) and Calvert Global Water Fund (CFWAX). The largest of the three, AWTPX, "focuses on companies that look to improve water supply, efficiency, and quality, solving problems while supporting growth opportunities." It is actively managed and weighs in at $580 billion, according to Morningstar. Meanwhile, the $396 million CFWAX employs a passive strategy that invests in water-related businesses that meet the characteristics of the Calvert Principles for Responsible Investment. U.S.-focused PHO is a $922 million fund and shares many of the top holdings as those of Calvert and Allianz.
Two of the seven funds mentioned, Fidelity Select Environment and Alternative Energy Portfolio (FSLEX) and Invesco WilderHill Clean Energy ETF (PBW), invest in alternative energy. About half of the $189 million in FSLEX is concentrated in the fund's top holdings, which has contributed to some struggles over the past year. The $129 million PBW fund, which "follows the performance of global companies engaged in the advancement of clean energy and conservation," according to Morningstar, has done well in the first quarter of the year, due to its technology holdings.
A more diversified environmentally focused fund is Pax Global Environmental Markets (PGINX), noted the firm. The last fund highlighted was VanEck Vectors Environmental Services ETF (EVX), which meets the sustainable sector funds threshold but holds a large percentage of funds (73%) in the industrials sector.