Decarbonised Dividends

USA

First Trust lists dividends decarbonisation ETF

First Trust and Energy Income Partners are teaming up to list an actively managed decarbonisation ETF that eyes dividends. The First Trust EIP Carbon Impact ETF (ECLN) will invest in energy and utility companies, as well as MLPs, that are judged to be reducing their respective sector’s carbon footprints.  

The fund starts by creating a universe utility and energy companies, as well as MLPs. It then eliminates polluters and chooses stocks based on quantitative and qualitative measures. The quantitative measures include balance sheet strength, free cash flow and dividend payout. While qualitative include competitiveness and sustainability.

The prospectus did not include an expense ratio.

Analysis – First Trust and EIP work together again

First Trust and Energy Income Partners have worked together before, and built the First Trust MLP and Energy Income Fund (FEI), a closed-end fund with a market cap of around $560 million. (And a massive 10% dividend yield).

Today’s listing seems to offer something similar but different. ECLN will invest in MLPs and energy companies with a view to dividends, much like FEI. The major difference in investment strategy seems to be the decarbonisation focus, although it’s hard to know how strict that focus will be (at this stage at least). 

Those considering today’s listing should be sure to understand what MLPs are. While they provide fat and juicy dividends they come with risks and tax implications of their own.