United States Commodity Funds (USCF) has introduced a new actively managed ETF delivering exposure to three sustainability-focused themes: agriculture, renewable energy, and electrification.
John Love, President and CEO of USCF.
The USCF Sustainable Commodity Strategy Fund (ZSC US) has been listed on NYSE Arca with an expense ratio of 0.59%.
The fund seeks a total return by investing primarily in commodity derivatives and, to a lesser extent, in the equities of companies that are economically tied to the target themes. Each of the three themes are approximately equally weighted in the portfolio.
The ETF will also seek to achieve a “net-zero” carbon footprint by purchasing carbon offset investments in an amount equal to the estimated aggregate carbon emissions of the fund’s holdings.
Agriculture
USCF believes that the global push to reduce greenhouse gas emissions coupled with global population growth will increase the demand for agricultural commodities that can be produced sustainably.
When selecting investments for the Agriculture thematic sleeve, USCF considers factors such as water usage, chemical and fertilizer usage, and the ratio of greenhouse gas emissions to weight or calories/protein produced.
Taking the above factors into account, the Agriculture sleeve comprises commodity derivatives tied to grain crops and oilseeds (such as soybeans, hemp, and various nuts and legumes), and, to a lesser extent, cotton, sugar, and coffee.
Renewable Energy
USCF notes that global demand for renewable energy (wind, solar, water, and biomass) will continue to increase as countries across the globe seek more sustainable ways to produce power and implement rules and regulations that encourage renewable energy production.
The Renewable Energy thematic sleeve consists of a mix of commodity derivatives and commodities equities, including renewable energy certificates and credits, and equity securities of companies engaged in the production, extraction, distribution, or other activities related to a particular renewable energy source.
Electrification
“Electrification” refers to the process of replacing technologies that use fossil fuels with technologies that use electricity as a source of energy. The process of electrification is heavily reliant on the production and development of batteries that contain certain industrial metals, precious metals, and rare earth metals.
The Electrification thematic sleeve initially includes metals such as aluminum, cobalt, copper, graphite, iron ore, lithium, nickel, silver, and zinc.
Commenting on the new listing, John Love, President and CEO of USCF, said: “We believe that ZSC offers investors the opportunity to capture the benefits of commodities through a new lens. ZSC delivers commodity exposure oriented toward the agriculture needed to feed the world’s growing population, renewable energy, and the electrification metals poised to benefit from secular growth tied to the energy transition.”
ZSC complements the actively managed USCF Sustainable Battery Metals Strategy Fund (ZSB US) which launched in January and utilizes a mix of commodity and equity exposures to target the battery metals investment theme. Its expense ratio is also 0.59%.