Precious metals aren’t probably the first things to come to mind when one thinks about sustainable investing. In fact, parts of the gold industry account for the single-largest source of man-made mercury emissions, according to a 2019 United Nations report.
But with inflation roaring, and crypto’s failing to act like the great inflation hedge some had hoped for, some ETF sponsors are looking to ways to make gold appealing to the environmentally conscious investor set.
Last week, Sprott Asset Management, partnering with the Royal Canadian Mint, launched the Sprott ESG Gold ETF, which holds gold bullion sourced from companies and mines that its prospectus says meet the Canadian manager’s environmental, social and governance standards. Initially, the gold will come from Canadian mines like Agnico Eagle Mines and Yamana Gold, a press release states.
“Our goal is to answer a number of key questions for investors: where does my gold come from, who produced it and was it produced sustainably by recognized ESG leaders?” said John Ciampaglia, chief executive of Sprott Asset Management, in the release.
The launch follows the June debut of Franklin Templeton’s Responsibly Sourced Gold ETF, which now represents about $34 million in assets, according to Franklin’s website. That ETF holds London Good Delivery gold bullion bars that were refined on or after Jan. 1, 2012, and meet the London Bullion Market Association’s responsible gold guidance, according to Franklin’s fact sheet.
This guidance is focused on miners and producers' ethical and environmental standards, and their ability to demonstrate efforts to combat money laundering, terrorism financing, and human rights abuses, the product sheet notes.
The rise of greener gold ETFs in some ways encapsulates the push-pull of investors when it comes to maximizing returns while minimizing environmental impacts. Commodity-focused ETFs have soared in sales this year, with geopolitical risk sending the price of oil, gas, foodstuffs and other natural resources skyrocketing.
Click on the image to hear Invesco's Anna Paglia discuss demand for commodity ETFs.
Commodity ETFs have amassed $8.8 billion in new investments year-to-date through July, according to a State Street Global Advisors
review. That is even after investors pulled $6 billion from them in July. (State Street attributes the outflows to profit-taking, the asset class was up 4.1% in the month.)
And yet, while last quarter sustainable funds in Morningstar’s database saw outflows for the first time in five years the organic growth decline of 0.45% remained less than the overall market decline 0.74%.
It remains to be seen whether more sustainable options reduce a mental barrier of clients to holding gold. But the products still will be subject to the dynamics of the up-and-down gold market.
North American-listed gold ETFs saw $2.5 billion of outflows last month, as gold prices fell 3.5% in the month to $1,753 per ounce, according to the World Gold Council’s July report.
Gold price declines, a strong dollar and strong equity markets, combined with reduced long-holdings in gold futures, likely drove the outflows, the report notes.