Both the State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) i iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) target for global equity exposure, but their approaches diverge: NZAC aims to align with climate goals in developed and emerging markets, while IEMG focuses on emerging market shares This comparison examines their cost, yield, risk, sector leanings and structural quirks to help investors decide which best fits their portfolio goals.

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-year return represents the total return over the following 12 months.

IEMG outperforms NZAC in one-year performance and profitability, has lower expenses and has more substantial assets under management (AUM).

IEMG holds 2,707 emerging market stocks, with its primary focus on the technology sector (23%), followed by financials (16%) and industrials (12%). Its main holdings are Taiwan Semiconductor Manufacturing (2330.SR), Samsung Electronics Ltd (005930.KS)i Tencent Holdings Ltd (0700.HK)giving it more exposure to Asian tech giants.

NZAC targets companies that meet climate-aligned criteria, providing investors with exposure to efforts to reduce climate risks. It holds 729 stocks, with technology accounting for 32% of assets, followed by financial services (16%) and industrials (10%). Key holdings such as Nvidia(NASDAQ:NVDA), Apple (NASDAQ:AAPL)i Microsoft (NASDAQ:MSFT) emphasize its technological inclination in the United States. The fund has been in operation for over 11 years and incorporates an ESG screen, which assesses which companies align with relevant sustainability issues and are selected for the fund.

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IEMG appears to be outperforming on several performance measures compared to NZAC, but that doesn’t mean the sustainability-focused ETF has no value. With several countries around the world moving towards the promises they made in the Paris Agreement. And as demand for climate change efforts increases around the world, companies that have not yet passed the ESG check can meet the criteria to keep up.

One advantage NZAC might have over IEMG is its weaker international influence. For US investors, this can be beneficial if they are unfamiliar with international assets, as they are often more volatile and move very differently from US stocks.

Although NZAC has foreign assets, its main US holdings are currently weighted enough to not be too affected if a major foreign event were to occur in Asia and/or Europe. But for global tech exposure, both funds aren’t bad choices.

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Ade Hennis has positions in Apple and Nvidia. The Motley Fool has positions and recommends Apple, Microsoft and Nvidia. The Motley Fool has one disclosure policy.

Does NZAC’s focus on climate change give it an edge over IEMG? was originally published by The Motley Fool