Investors choosing between Vanguard FTSE Developed Markets ETF (NYSEMKT:VEA) and State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) must weigh broad international exposure against a targeted net-zero climate strategy.
Vanguard FTSE Developed Markets ETF tracks established non-U.S. economies, offering low-cost access to thousands of companies across Europe and the Pacific. In contrast, the State Street SPDR MSCI ACWI Climate Paris Aligned ETF targets global companies aligned with the Paris Agreement, utilizing specific environmental screens that lead to a distinct portfolio tilt toward technology and sustainable transition leaders.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard fund remains one of the most affordable options in its category with a 0.03% expense ratio. While State Street SPDR MSCI ACWI Climate Paris Aligned ETF is cost-competitive for an ESG strategy at 0.12%, it offers a lower payout to shareholders.
Performance & risk comparison
What’s inside
State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) focuses on sectors like Technology at 34.00%, Financial Services at 14.00%, and Cash & Others at 10.00%. It holds 630 positions, and its largest positions include Nvidia (NASDAQ:NVDA) at 6.01%, Apple (NASDAQ:AAPL) at 5.05%, and Microsoft (NASDAQ:MSFT) at 3.02%. The fund applies an ESG screen to maintain alignment with international climate goals. It was launched in 2014. State Street SPDR MSCI ACWI Climate Paris Aligned ETF has paid $0.94 per share over the trailing 12 months, which on its recent ~$46.19 share price works out to a 2.10% yield.
Vanguard FTSE Developed Markets ETF (NYSEMKT:VEA) spreads its 3,873 holdings across Financial Services at 23.00%, Industrials at 18.00%, and Technology at 17.00%. Its top holdings include Samsung Electronics (KRX:005930) at 3.01%, SK Hynix (NASDAQ:SKHY) at 2.57%, and ASML Holding (NASDAQ:ASML) at 1.91%. The fund seeks to replicate the FTSE Developed All Cap ex U.S. Index by investing in a wide array of large-, mid-, and small-cap stocks. It was launched in 2007. Vanguard FTSE Developed Markets ETF has paid $1.81 per share over the trailing 12 months, which on its recent ~$70.99 share price works out to a 2.60% yield.
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What this means for investors
International stocks delivered one of their strongest runs in years recently, and both VEA and NZAC captured gains during that period. But these two funds are solving for different problems, which is the most important thing to understand before choosing between them.
VEA is a pure international diversifier, holding thousands of companies across developed markets in Europe, Japan, Canada, and Australia with no U.S. exposure whatsoever. Investors who want to balance a U.S.-heavy portfolio with international exposure will find VEA does that job directly and at a very low cost.
NZAC holds significant U.S. exposure alongside global markets, filtered through a Paris Agreement climate screen. Its top holdings are the same megacap names that dominate most American portfolios already, meaning it delivers less international diversification than its “global” label implies.
Another major difference here is that VEA charges a fraction of what NZAC does. So for most long-term investors seeking international exposure as a counterweight to domestic holdings, VEA is the more purposeful and cost-efficient choice. NZAC is the one to consider if you want to align your investments with the goals of the Paris climate agreement.
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Sara Appino has positions in Apple and Nvidia. The Motley Fool has positions in and recommends ASML, Apple, Microsoft, Nvidia, and Vanguard FTSE Developed Markets ETF. The Motley Fool has a disclosure policy.
Which Is the Better Global ETF for Long-Term Investors: Vanguard’s VEA or State Street’s NZAC? was originally published by The Motley Fool