Virtus Duff & Phelps Clean Energy ETF

overall rating:

1.75

planets

Dagny Weakley
3/13/2022
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Virtus Duff & Phelps focuses on renewable energy and is an innovative clean energy fund. Overall, I would rate this ETF 1.75 planets because the holdings I researched seem to be prioritizing the environment and focusing on helping others do the same. The criteria for being included in this ETF seems like the managers do have a large say, but they focus on companies that are making innovative changes in renewable energy fields, which I was able to see through the 3 top holdings. Additionally, the two partner investment companies are focusing on their environmental impact and making progressive changes that other companies should follow and promote. However, I think that as two large investment companies, they could be doing more for the environment and being more transparent with their intentions as an ESG.

What it's made of:

1.75

Virtus Duff & Phelps Clean Energy ETF’s top 10 holdings constitute 51.67% of the ETF. The fund prides itself on globally investing in clean, renewable, and sustainable companies. The most prevalent sector of the holdings is utilities with 51.02%, producer manufacturing with 23.86%, and electronic technology with 19.29%. Although the fund is not entirely responsible, it is important to note that the environmental impact of solar panels and other electronic companies can be somewhat negative because of the mining necessary in order to produce the energy and equipment. There are also negative social impacts affiliating with mining because it displaces and pollutes communities. 

The top holding is Enphase energy with 7.54% Enphase combines solar, batteries, and software together in one system and allows you to manage your solar panels through an app. Enphase also makes it a point to emphasize that their solar panels use a battery that allows them to work no matter the weather. They also allow you to possibly sell the energy you don’t use, which further adds to its affordability.

The second-largest holding is Orsted with 7.02%. Orsted is attempting to help the world run on renewable energy through wind farms, solar farms, energy storage facilities, renewable hydrogen and green fuel facilities, and bioenergy plants. They are the only energy company in the world with a science-based net zero emissions target as validated by the Science Based Targets initiative, which is a company that helps other corporations calculate how much and how quickly they need to reduce their GHG emissions in order to prevent the worst effects of climate change. One of the most fascinating things about Orsted is the fact that they actually used to be a fossil fuel company, decided to switch to renewable energy in 2008, and are now the world’s leader in offshore wind. Along with this, they also make their sustainability report easily accessible and state their goals to completely phase out their emissions by the end of 2023.

The third-largest holding is Vestas Wind Systems A/S with 6.95%. They are a market leader in the North American wind industry and have installed their wind turbines in 85 countries. Their target is to optimize the value of the energy produced by the turbines, reduce risks, and ensure a seamless power system. Their website features their sustainability report highlighting the 186 million tonnes avoided and their goals to make their rotor recyclability 50% by 2025, along by reducing their own emissions by 55% and having 25% of their leadership positions be held by women. They seem very transparent with their current emissions and their goals, along with their positive impact on the environment. 

Sustainalytics did not rate Virus Duff & Phelps Clean Energy ETF independently, but they did rate Virtus, the main partner company, at 34.9 which is a high ESG risk. From my findings, it seems like the ETF is sustainable, as they are investing in innovative, clean energy companies; however, it is important to note that they are managed by a company that may not have those interests. Overall, I would give this ETF 1.75 planets for what it’s made of because it does seem to be composed of companies that truly value the environment and are attempting to make meaningful contributions to a clean environment; however, I am cautious of their intent because of their connection to Virtus.

How it's made:

1.75

It was a little difficult to find information on how Virtus Duff & Phelps Clean Energy ETF classifies being an ETF and what criteria they use to pick the holdings, which leads me to believe that their fund managers have a lot of power in this area. However, I did find that their team prioritizes clean energy technology and equipment providers and clean energy and distribution companies where innovation is most commercially proven. Just from looking at their top 3 holdings, I would agree that this seems to be the case since the companies I researched seemed to be progressive and successful in their fields. In addition to this, the fund does not invest less than 80% of its net assets in equity securities of clean energy companies. They define clean energy companies as those that derive 50% of their value from one or more of the following clean energy businesses: the production of clean energy, the provision of clean energy technology and equipment, or the transmission and distribution of clean energy. Overall, I would give this ETF 1.75 planets for how it’s made because I think the criteria they have in place does ensure that the company has the environment as its main focus, but I would like to have more information on its classification as an ESG.

Who makes it:

1.75

This fund is partnered between Virtus and Duff & Phelps, both large investment companies. Virtus’ sustainability report states that all the electricity supplied to their customers is from 100% renewable energy like wind, solar, and hydro supplies. However, their report does mention that they use diesel fuel and monitor it very closely with the hopes of reduction, along with engaging in trading emissions. I was also surprised to note that their sustainability report did not mention anything about diversity of women in the workplace, unlike some others I have seen. Duff & Phelps announced a little under 2 years ago that they achieved carbon neutrality across all 25 global offices, which is an incredible feat for a large investment company. They have newly rebranded to “Kroll”, a former risk management subsidiary, in order to improve efficiency and create consistency. I am curious to see how this affects their ESG efforts; however, it seems like their assets and goals have stayed the same. Overall, I would give this fund a 1.75 for who makes it because it seems like both investment companies have prioritized the environment and are continuously making efforts to improve their footprint and investment in companies doing the same; however, I am curious about the “trading” of emissions, and how the power of the investment manager can allocate funds to areas not pursuing positive climate change. In addition to this I would like to see more information from the company about their DEI efforts to see if they truly value diversity.