Sprott Asset Management has partnered with Europe’s HANetf to launch a copper mining equity ESG ETF. The LSE listed ETF is called Sprott Copper Miners ESG-Screened UCITS ETF and trades under the ticker CPPR.
The ETF offers investors exposure to pure-play global copper mining equities, that meet stringent ESG criteria including carbon emissions and being responsible operators. Being the lowest carbon emitters is key, for which Sprott received input from Skarn Associates. “Companies with a higher than average carbon footprint were omitted or we reduced their natural market cap rating because they are higher carbon emitters. This is a way to screen out or reduce exposure to the highest carbon emitting copper miners in the world,” Sprott Asset Management Chief Executive, John Ciampaglia told Skarn Bulletin.
The index methodology eliminates companies with high levels of controversy, according to data from Sustainalytics, and those who are not compliant with the UN Global Compact commitments to implement universal sustainability principles. “Institutional investors want to invest in the energy transition and many conclude that copper will be the backbone, but they don’t want to invest in copper miners that are not good stewards,” said Ciampaglia.
Sprott launched the COPJ Sprott Junior Copper Miners ETF in the USA in February, noting that there were no junior copper miner ETFs anywhere in the world. Approached by a large institutional investor who wanted copper exposure, but who was not enamoured by products in the market, Sprott set out on the design path. “When we analysed the competition in the market we found there were two copper miner ETFs in Europe, but when we dissected the company revenue streams and asset bases, one was only 58% exposed to copper and the other only 42%. Our first takeaway was that if someone wants to play the copper thematic, it should be in something that has more pure play exposure,” said Ciampaglia.
The CPPR ETF is 78% exposed to copper and contains 27 companies. Higher exposure is not currently possible due to the structure of the copper market, with only Freeport McMoRan, Southern Copper, First Quantum Minerals and KGHM generating more than 70% of 2022 revenues. “Only four of the top 10 copper producers are investible in terms of them being public companies that derive the majority of their revenue from copper. Many of the diversified miners have greater exposure to coal, gold, zinc or iron ore,” said Ciampaglia.
Sprott will reevaluate and rescore companies every six months and adjust the index and ETF accordingly. Many of the largest copper producers are the world’s biggest diversified miners for whom copper generates less than 30% of revenues. However, with so much energy transition repositioning among the major diversified miners in recent months, Ciampaglia expects there will eventually be some major changes.
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