SPDR MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX) seeks to track the MSCI EAFE ex Fossil Fuels Index, which measures the performance of developed market stocks in Europe, Australasia, and the Far East while excluding companies that own fossil fuel reserves. This ESG-focused international equity ETF provides exposure to approximately 400+ companies across 21 developed countries.
How It Works
EFAX uses a passively managed, market-capitalization-weighted approach that mirrors its benchmark index methodology. The fund excludes companies with proven or probable fossil fuel reserves, including coal, oil, and natural gas producers, while maintaining sector and country allocations similar to the broader EAFE market. Holdings are rebalanced quarterly to reflect index changes and maintain fossil fuel-free criteria. The strategy results in overweights to technology, healthcare, and consumer sectors while underweighting energy and some utilities.
Key Features
- Systematically excludes all fossil fuel reserve owners while maintaining broad developed international market exposure across 400+ holdings
- Provides ESG-conscious investors access to European, Japanese, and other developed markets without energy sector concentration risks
- Maintains similar country and sector allocations to traditional EAFE funds except for fossil fuel exclusions
Risks
- This ETF can lose value during international market downturns, potentially declining 40-50% in severe global recessions like 2008-2009
- Currency fluctuations between the U.S. dollar and foreign currencies can significantly impact returns, adding 5-15% annual volatility
- Fossil fuel exclusions may cause underperformance during energy sector rallies or commodity price spikes when oil stocks outperform
Who Should Own This
Best suited as a core international holding (20-40% of equity allocation) for ESG-focused investors with 5+ year time horizons seeking developed market exposure without fossil fuel companies. Medium-to-high risk tolerance required due to international equity volatility and currency exposure. Ideal for socially responsible portfolios or investors wanting broad international diversification while avoiding energy sector risks.