Will this new DTOX ETF clean up when it comes to performance?

The ETF aims to give exposure to “cleaner living” in a range of areas, including food, infrastructure, travel and energy.

Investors over the past year have been piling into funds that track the “clean energy” theme. The iShares Global Clean Energy ETF (LSE:INRG), for example, saw such large inflows that its index provider (S&P) had to expand the number of companies tracked. With climate change becoming more of a concern, investors have been buying into funds that provide exposure to renewable, clean energy.

A newly launched exchange-traded fund (ETF), however, expands this “clean” theme beyond just energy. Cleaner Living ESG -S UCITS ETF (LSE:DTOX) aims to give exposure to “cleaner living” in a range of areas, including food, infrastructure, work, travel and energy.

According to the ETF’s literature: “Cleaner Living seeks to eliminate, wherever possible, artificial chemicals, additives and ingredients that are deemed to have potentially harmful effects, as well as avoid the materials or technologies that can damage the planet through pollution or depletion of natural resources.”

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The ETF tracks the Tematica Bita Cleaner Living Sustainability Screened index. This index aims to capture the market performance of companies that derive more than 80% of their revenue or earnings from selling goods or services in least one of the following five segments:

• Cleaner Building & Infrastructure
• Cleaner Energy
• Cleaner Food & Dining
• Cleaner Health & Beauty
• Cleaner Transportation

According to the ETF provider, there are several drivers that should benefit companies in these categories. First, there is an increased amount of consumer spending on so-called clean products. Consumers who do opt for such product are also usually willing to pay a premium.

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At the same time, companies are increasingly working towards providing cleaner products to capture this shift in consumer spending. And finally, there is increased move among governments to pass policies that address pollution and climate change, as well as promoting healthier eating and living.  

The index includes 94 companies, all of which are equally weighted. Among them are Chipotle Mexican Grill (NYSE:CMG), Lululemon (NASDAQ:LULU), Peloton (NASDAQ:PTON), Beyond Meat (NASDAQ:BYND) and Tesla (NASDAQ:TSLA).

The ETF also employs an ESG screen, removing companies involved in weapons and those deemed to have a particularly high carbon use score.

According to the ETF’s latest factsheet, the index provided a return of over 180% in 2020, in US dollar terms. However, so far this year the index has produced a negative return, losing investors 8.7% since the start of the year, measured to 8 September.