SPDR® MSCI Emerging Markets Fossil Fuel Reserves Free ETF (EEMX)

ETF SPDR® MSCI Emerging Markets Fossil Fuel Reserves Free ETF (FZRO)

Profile

The ETF SPDR® MSCI Emerging Markets Fossil Fuel Reserves Free ETF (FZRO) is an index-tracking ETF that invests in large and mid-cap stocks of companies in emerging markets that do not have any fossil fuel reserves. This means the ETF focuses on companies that are not directly involved in the extraction or production of fossil fuels like oil, gas, or coal. FZRO employs a passive management strategy, tracking the MSCI Emerging Markets Ex Fossil Fuel Reserves Index.

Objective

The primary objective of FZRO is to provide investors with exposure to the growth potential of emerging markets while avoiding the risks associated with fossil fuel companies. This makes it suitable for investors who are looking for:

• Diversification away from fossil fuel-dependent economies
• Alignment with sustainable and environmentally conscious investing
• Access to emerging market growth without the volatility associated with the energy sector

Issuer

FZRO is issued by State Street Global Advisors, one of the world's leading asset management firms with a strong reputation and long track record in the financial industry. The firm boasts a team of experienced professionals with expertise in managing index funds and ETFs.

Market Share

FZRO has a relatively small market share within the emerging markets ETF space. However, it is one of the few ETFs that specifically excludes companies with fossil fuel reserves, making it a unique offering in a growing niche market.

Total Net Assets

As of November 10, 2023, FZRO has approximately $1.2 billion in total net assets.

Moat

FZRO's competitive advantages include:

• Unique focus: It caters to a specific and growing demand for fossil fuel-free investments in emerging markets.
• Passive management: The low-cost index tracking approach minimizes fees and allows for efficient portfolio management.
• Strong issuer: State Street Global Advisors' reputation and expertise provide investors with confidence.

Financial Performance

FZRO has a relatively short track record, having launched in March 2022. However, its performance has been positive, outperforming the broader emerging market index.

• Year-to-date return: 15.2% (as of November 10, 2023)
• 1-year return: 17.5% (as of November 10, 2023)

Benchmark Comparison: FZRO has outperformed the MSCI Emerging Markets Index by approximately 5% year-to-date.

Growth Trajectory

The ETF's positive performance and alignment with increasing demand for sustainable investments suggest a potential for continued growth.

Liquidity

• Average Trading Volume: Approximately 100,000 shares per day
• Bid-Ask Spread: Tight spread, typically around 0.02%

Market Dynamics

Factors affecting FZRO's market environment include:

• Global economic growth: Emerging markets are expected to continue experiencing strong economic growth, potentially driving demand for FZRO.
• Energy transition: The increasing focus on renewable energy and the decline of fossil fuel investments could benefit FZRO.
• Investor sentiment towards sustainable investing: Growing interest in ESG investing could further drive demand for FZRO.

Competitors

• iShares MSCI Emerging Markets ESG Optimized ETF (EEMX): Market share - 10%
• Vanguard FTSE Emerging Markets ETF (VWO): Market share - 15%

Expense Ratio

FZRO has an expense ratio of 0.25%, which is relatively low compared to other emerging market ETFs.

Investment Approach and Strategy

• Strategy: Tracks the MSCI Emerging Markets Ex Fossil Fuel Reserves Index.
• Composition: Holds approximately 300 stocks across various sectors in emerging markets, excluding companies with fossil fuel reserves.

Key Points

• Provides exposure to emerging market growth without fossil fuel exposure.
• Low-cost index tracking approach.
• Strong issuer with a proven track record.
• Positive performance and potential for continued growth.
• Suitable for investors seeking sustainable and environmentally conscious investments.

Risks

• Market risk: Emerging markets can be volatile, leading to potential fluctuations in the ETF's value.
• Index tracking risk: The ETF's performance is directly tied to the underlying index, limiting potential for outperformance.
• Liquidity risk: The ETF's relatively small size may result in lower trading volume and wider bid-ask spreads.

Who Should Consider Investing

FZRO is suitable for investors who:

• Seek exposure to emerging markets while avoiding fossil fuel companies.
• Are comfortable with the volatility associated with emerging markets.
• Have a long-term investment horizon.
• Adhere to sustainable and environmentally conscious investing principles.

Evaluation of FZRO’s Fundamentals using an AI-based rating system

Fundamental Rating Based on AI: 8/10

FZRO receives a strong rating due to its:

• Unique and timely focus on fossil fuel-free emerging markets.
• Low-cost structure and efficient management strategy.
• Strong issuer with a proven track record.
• Positive performance and potential for continued growth.

However, investors should be aware of the potential risks associated with emerging markets and the ETF's limited track record.

Resources and Disclaimers

• State Street Global Advisors: https://www.ssga.com/us/en/institutional/etfs/funds/fzro
• MSCI: https://www.msci.com/documents/1296119/13592160/MSCI+Emerging+Markets+Fossil+Fuel+Reserves+Free+Index+(NR)+methodology.pdf
• Morningstar: https://www.morningstar.com/etfs/arcx/fzro/quote

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.