Xtrackers MSCI USA Climate Action Equity ETF (USCA)

Analysis of ETF Xtrackers MSCI USA Climate Action Equity ETF (US: ZCLN)

Profile:

ZCLN is an ETF that tracks the MSCI USA Climate Action Target Index. This index selects companies from the MSCI USA IMI Index that have a high potential for positive environmental impact. The ETF primarily focuses on the US market and invests in sectors such as renewable energy, energy efficiency, and sustainable transportation. It utilizes a weighted index sampling strategy, where companies are selected based on their environmental impact and market capitalization.

Objective:

The primary objective of ZCLN is to provide investors with long-term capital appreciation by tracking the performance of the MSCI USA Climate Action Target Index. The ETF aims to achieve this by investing in companies that are actively contributing to the transition towards a more sustainable economy.

Issuer:

ZCLN is issued by Xtrackers, which is a brand of DWS Group, a global asset management company with over €942 billion in assets under management. DWS Group has a strong reputation in the market and is known for its expertise in sustainable investing. The management team responsible for ZCLN has extensive experience in the financial industry and a deep understanding of environmental, social, and governance (ESG) factors.

Market Share:

ZCLN has a relatively small market share in the climate-focused ETF space. However, it is one of the most popular ETFs in its category, with over $1 billion in assets under management.

Total Net Assets:

As of October 26, 2023, ZCLN has $1.14 billion in total net assets.

Moat:

ZCLN has several competitive advantages, including:

• Focus on climate action: The ETF's unique focus on companies with a positive environmental impact differentiates it from other ESG-focused ETFs.
• Strong track record: ZCLN has outperformed the broader market since its inception in 2020.
• Experienced management team: DWS Group has a strong reputation for its expertise in sustainable investing.

Financial Performance:

Since its inception in February 2020, ZCLN has delivered a cumulative return of 48.72%. This compares favorably to the S&P 500 Index, which has returned 27.58% over the same period.

Growth Trajectory:

The global market for climate-focused investments is expected to grow significantly in the coming years. This is due to increasing awareness of climate change and the growing demand for sustainable investment options. ZCLN is well-positioned to benefit from this trend.

Liquidity:

ZCLN has an average daily trading volume of over 100,000 shares. This makes the ETF relatively liquid and easy to trade. The bid-ask spread is also relatively tight, indicating that the ETF can be bought and sold at a competitive price.

Market Dynamics:

Several factors are affecting the market environment for ZCLN, including:

• Government policies: Governments around the world are increasingly implementing policies to support the transition to a low-carbon economy.
• Corporate sustainability initiatives: Many companies are adopting sustainability initiatives to reduce their environmental impact and improve their ESG performance.
• Investor demand: There is a growing demand from investors for sustainable investment options.

Competitors:

ZCLN's main competitors include:

• iShares Global Clean Energy ETF (ICLN)
• Invesco WilderHill Clean Energy ETF (PBW)
• VanEck Vectors Environmental Sustainability ETF (ESES)

Expense Ratio:

ZCLN has an expense ratio of 0.25%. This is relatively low compared to other climate-focused ETFs.

Investment Approach and Strategy:

ZCLN tracks the MSCI USA Climate Action Target Index, which is a rules-based index that selects companies based on their environmental impact and market capitalization. The ETF invests in a diversified portfolio of stocks across various sectors, including renewable energy, energy efficiency, and sustainable transportation.

Key Points:

• ZCLN is a climate-focused ETF that tracks the MSCI USA Climate Action Target Index.
• The ETF has a strong track record and is well-positioned to benefit from the growing market for sustainable investments.
• ZCLN has a low expense ratio and is relatively liquid.

Risks:

ZCLN is subject to several risks, including:

• Market risk: The ETF's performance is tied to the performance of the underlying companies in its portfolio.
• Volatility: The climate-focused ETF market is relatively new and can be volatile.
• Interest rate risk: Rising interest rates can impact the valuation of the companies in ZCLN's portfolio.

Who Should Consider Investing:

ZCLN is suitable for investors who are looking for:

• Long-term capital appreciation
• Exposure to companies with a positive environmental impact
• A diversified portfolio of climate-focused stocks

Fundamental Rating Based on AI:

Based on an AI-based rating system, ZCLN receives a rating of 8 out of 10. This rating is based on the ETF's strong financial health, market position, and future prospects. The AI system considers factors such as the ETF's track record, expense ratio, and portfolio composition.

Resources and Disclaimers:

This analysis is based on information from the following sources:

• Xtrackers website
• DWS Group website
• Morningstar
• Bloomberg

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