One Climate ETF Holds 10.2% in NVIDIA but Zero Energy Stocks – How?

Most climate-focused ETFs require investors to choose between their values and their returns. iShares Paris-Aligned Climate Optimized MSCI USA ETF (NASDAQ:PABU) takes a different approach by keeping one foot in the growth trade while screening for climate alignment. The question is whether this middle ground delivers on either promise.

What PABU Actually Does

PABU tracks US large and mid-cap stocks that meet Paris Climate Agreement criteria, overweighting companies with lower carbon intensity and higher green revenue potential. The fund’s structure reveals its true nature: technology dominates with NVIDIA (NASDAQ:NVDA) commanding 10.2% of assets, making this more of a tech bet with climate screening than a diversified ESG play. The concentration extends beyond NVIDIA, with the top three holdings controlling a quarter of the entire portfolio.

This is not a defensive climate fund. Information Technology makes up 39.9% of assets while Energy sits at zero. The return engine depends on mega-cap tech continuing to deliver growth while simultaneously qualifying as climate-friendly through data center efficiency improvements and renewable energy commitments. That dual mandate creates an unusual risk profile.

Performance Reality Check

The climate screening creates a persistent performance drag that investors need to understand. Since launching in February 2022, PABU has returned roughly 51% compared to the S&P 500’s 79% gain. This…