NZAC Screens for Climate. IEMG Screens for Growth. Here’s How to Choose.

Investors choosing between State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) and iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) must weigh a global climate-tilted strategy against broad emerging markets exposure.

Both funds provide international equity exposure but with fundamentally different goals. NZAC targets a “net-zero” strategy by filtering global stocks for climate risk, while IEMG serves as a low-cost cornerstone for investors seeking large-, mid-, and small-cap companies specifically within developing nations.

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 iShares fund is the more affordable option with a 0.09% expense ratio compared to 0.12% for the SPDR fund. Additionally, the iShares fund offers a higher trailing-12-month distribution yield of 2.20%.

Performance & risk comparison

What’s inside

iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) provides exposure to 2,661 holdings across technology (23%), financial services (18%), and consumer discretionary (9%). Launched in 2012, its largest positions include Taiwan Semiconductor Manufacturing at 12.56%, Samsung Electronics at 5.39%, and SK Hynix at 3.87%. The fund has a trailing-12-month dividend of $1.85 per share and tracks an index focused on large-, mid-, and small-capitalization emerging market equities.

In contrast, State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) tracks the MSCI ACWI Climate Paris Aligned Index, filtering 714 holdings for ESG and net-zero alignment. Its largest sector weights are technology (30%) and financials (18%), and top holdings include Nvidia (NASDAQ:NVDA) at 5.88%, Apple (NASDAQ:AAPL) at 4.40%, and Microsoft (NASDAQ:MSFT) at 3.44%. Launched in 2014, the fund has a trailing-12-month dividend of $0.82 per share.

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What this means for investors

These two funds rarely end up in the same conversation, and for good reason: They are built for entirely different investors with entirely different goals. NZAC is a global fund spanning both developed and emerging markets, but its defining feature is its climate mandate. It tracks an index aligned with the Paris Agreement, overweighting companies positioned for the low-carbon transition and reducing exposure to high-emission industries. The result is a broadly diversified global portfolio with an environmental lens built in.

IEMG has no climate screen whatsoever. It tracks the full MSCI Emerging Markets index (China, India, Taiwan, South Korea) capturing the growth potential of developing economies regardless of their carbon footprint. That breadth includes energy companies, heavy industry, and state-owned enterprises that NZAC would downweight or exclude entirely.

The fee difference between them is modest, but the philosophical gap is enormous. NZAC suits investors who want global equity exposure aligned with their environmental values. IEMG is the better fit for those making a deliberate bet on emerging market growth without any values-based filter applied.

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Sara Appino has positions in Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

NZAC Screens for Climate. IEMG Screens for Growth. Here’s How to Choose. was originally published by The Motley Fool