Huntington, a Columbus-based bank, made the jump into the ETF industry this week with the debut of an actively-managed ETF that will hold a portfolio of ecologically-focused companies. The new Huntington EcoLogical Strategy ETF (HECO) will target companies that have positioned their business to respond to increased environmental legislation, cultural shifts towards environmentally conscious consumption, and capital investments in environmentally oriented projects.

Under the Hood

HECO will maintain a portfolio covering a wide range of sectors, as opposed to being limited exclusively to cleantech type stocks. Rather, the strategy will seek to identify companies that demonstrate environmental stewardship, and provide products and services that advance green practices and show evidence of sustainability. But the manager will not focus solely on identifying stocks with positive environmental, social and governance (ESG) factors; it will also seek to pick out stocks that are positioned to benefit from changing laws, regulations and consumer behavior .

Many green funds emphasize nascent technologies like wind and solar because they are clean, without regard to whether that's a logical investment, said Randy Bateman, Huntington's chief investment officer and president of Huntington Asset Advisors. Our approach looks at those opportunities, but then applies logic around whether or not that company is producing products that are affordable by broad markets.

Indeed, clean technology companies have been some of the worst performers over the past few years. Some of the ETFs in the Alternative Energy ETFdb Category, which includes both solar power and wind power products, have lost close to 80% of their value over the past three years.

Many of the components of the new ETF are well-known U.S. stocks; the initial holdings include Whole Foods (5.6% of assets), eBay 5.6%), Starbucks (2.9%), Johnson & Johnson, Walt Disney, Ford Motor Company and T. Rowe Price. The portfolio doesn't include any oil or coal companies.

According to the prospectus, HECO may invest up to about 35% of assets in ADRs of foreign companies.The fund will be managed by Brian Salerno, a Vice President and Senior Portfolio Manager with Huntington Asset Advisors. Huntington had also previously filed details on an actively-managed U.S. Equity Sector Rotation Strategy (HUSE) that would seek to tilt exposure towards corners of the domestic stock market that are expected to outperform.

Socially-Responsible ETFs

The investment thesis behind HECO is fairly straightforward: by targeting stocks that are positioned to benefit from the mega trend of eco-friendliness and greater awareness of environmental factors, the portfolio seeks to hold stocks that will outperform their peer groups over the long run. Companies that are ahead of the curve in terms of environmental stewardship may benefit from the evolving regulatory landscape and outperform their peer group.

There are a handful of other socially-responsible ETFs out there that cast a wide net across sectors instead of focusing on clean technology companies. HECO, however, will be the first actively-managed ETF with this investment objective. That could be appealing to investors who prefer some degree of management discretion in determining eco-friendliness, instead of a purely rules-based framework.

  • iShares KLD Select Social Index Fund (KLD)
  • iShares KLD 400 Social Index Fund (DSI)
  • North America Sustainability Index ETF (NASI)

Expenses on the above ETFs, all of which seek to passively replicate an index, range from 0.50% to 0.55%. HECO, which is actively managed, will charge a net expense ratio of 0.95%.

Disclosure: No positions at time of writing.

Related Articles
  1. Chart Advisor

    Bumpy Roads Ahead In Transportation

    Investors are keeping an eye on the transportation industry. We'll take a look at the trend direction and how to trade it.
  2. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  3. Mutual Funds & ETFs

    3 Fixed Income ETFs in the Mining Sector

    Learn about the top three metals and mining exchange-traded funds (ETFs), and explore analyses of their characteristics and how investors can benefit from these ETFs.
  4. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  5. Investing News

    Top Tips for Diversifying with Mutual Funds

    Are mutual funds becoming obsolete? If they have something to offer, which funds should you consider for diversification?
  6. Professionals

    Top Stocks to Short, Go Long On to Beat the Market

    A long/short portfolio can help weather a variety of market scenarios. Here's how to put one together.
  7. Mutual Funds & ETFs

    Top 4 Asia-Pacific ETFs

    Learn about four of the best-performing exchange-traded funds, or ETFs, that offer investors exposure to the Asia-Pacific region.
  8. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  9. Mutual Funds & ETFs

    Top 3 Japanese Bond ETFs

    Learn about the top three exchange-traded funds (ETFs) that invest in sovereign and corporate bonds issued by developed countries, including Japan.
  10. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!