The Invesco MSCI North America Climate ETF (KLMN) seeks to track the MSCI North America Climate Paris Aligned Index, which measures the performance of North American companies positioned to benefit from the transition to a lower-carbon economy while aligning with Paris Agreement climate goals.
How It Works
KLMN uses a passively managed approach that follows MSCI's climate methodology, which overweights companies with low carbon emissions, strong climate transition opportunities, and excludes fossil fuel producers. The index applies sector-neutral tilting to maintain broad market exposure while reducing overall portfolio carbon intensity by at least 50% versus the parent MSCI North America Index. Rebalancing occurs semi-annually with ongoing ESG screening.
Key Features
- Newly launched climate-focused ETF targeting North American companies with strong environmental transition positioning and low carbon footprints
- Zero expense ratio launch promotion makes this one of the most cost-effective climate investing options currently available
- Maintains sector diversification while significantly reducing carbon intensity compared to traditional broad market North American equity exposure
Risks
- This ETF can lose value if climate-focused companies underperform traditional energy sectors during oil price rallies or economic shifts favoring carbon-intensive industries
- New fund status with minimal assets creates liquidity risks and potential for wide bid-ask spreads during volatile market conditions
- North American equity exposure means 20-40% declines possible during broad market downturns, with additional volatility from ESG factor tilts
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for ESG-conscious investors with 3+ year time horizons seeking climate-aligned North American exposure. Medium-to-high risk tolerance required due to factor concentration and new fund risks. Appeals to investors wanting environmental impact without sacrificing broad market diversification.