Global Climate ETF or Emerging Markets: Which Has Better Returns?

The State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NZAC) and the iShares MSCI Emerging Markets ETF (EEM) present distinct investment strategies, with NZAC focusing on climate-conscious global exposure and EEM targeting emerging markets. While NZAC offers a lower expense ratio and a diversified portfolio with an ESG overlay, EEM is more volatile, featuring a higher annual fee and concentrated holdings in Asian technology and financial sectors.

Investors should note that despite EEM’s impressive 24% return over the past year, NZAC has outperformed over three, five, and ten-year periods. This performance divergence highlights the trade-off between immediate returns and long-term sustainability, particularly as international and emerging market stocks have recently outperformed U.S. equities.

For professionals assessing ETF options, the choice between NZAC and EEM may hinge on investment priorities: climate-conscious strategies versus higher yield potential in emerging markets.

Source: fool.com