Which Is the Better International ETF: State Street's Climate-Focused NZAC or iShares' Emerging Markets IEMG?

The State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) offers broad global exposure with climate-risk screens, while the iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) focuses strictly on diverse developing economies.

Investors often choose between broad geographic targets or specific thematic overlays. While IEMG provides low-cost access to thousands of companies across emerging markets, NZAC follows a net-zero strategy across both developed and emerging nations, aiming to mitigate climate-related financial risks for long-term portfolios.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). 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 slightly more affordable with an expense ratio of 0.09% compared to 0.12% for the State Street fund. Additionally, the iShares fund offers a higher trailing-12-month dividend yield than the State Street fund.

Performance & risk comparison

What's inside

State Street SPDR MSCI ACWI Climate Paris Aligned ETF focuses on Technology at 35%, Financial Services at 17%, and Healthcare at 9%. Its largest positions include Nvidia (NASDAQ:NVDA) at 9.08%, Apple (NASDAQ:AAPL) at 7.24%, and Microsoft (NASDAQ:MSFT) at 5.56%. The fund maintains 629 holdings and 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 ~$47 share price works out to a 2.0% yield. It incorporates an ESG screen to align with Paris Agreement goals.

iShares Core MSCI Emerging Markets ETF concentrates on Technology at 39%, Financial Services at 19%, and Consumer Cyclical at 9%. Its top holdings include Taiwan Semiconductor Manufacturing (TWSE:2330) at 13.30%, Samsung Electronics (KOSE:A005930) at 5.86%, and SK Hynix (KOSE:A000660) at 4.69%. The fund holds 2,862 positions and was launched in 2012. iShares Core MSCI Emerging Markets ETF has paid $1.80 per share over the trailing 12 months, which on its recent ~$79 share price works out to a 2.3% yield. It tracks a broad index of large, mid, and small-cap stocks from developing economies.

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Which looks like the better buy

These two funds carry international labels but serve very different investor needs, which is the most useful starting point for choosing between them.

NZAC applies a Paris Agreement climate screen across global markets, but look past the label and a striking reality emerges: Over half of the fund sits in U.S. stocks, with Nvidia, Apple, and Microsoft among the top holdings. For investors seeking international diversification, NZAC delivers less of it than its global branding implies.

IEMG takes investors somewhere completely different. Its more than 3,000 holdings concentrate entirely in developing economies, with Taiwan Semiconductor Manufacturing, Samsung, and SK Hynix anchoring the portfolio. That exposure to China, India, Taiwan, and South Korea offers true diversification from U.S. markets, but with geopolitical risk attached. China alone represents roughly 18% of the fund, making U.S.-China relations a direct input into performance.

IEMG costs less than NZAC and yields more, making it the better buy for investors who specifically want emerging market growth exposure. If you want your equity holdings aligned with climate goals and are comfortable owning a fund that behaves more like a climate-filtered U.S. technology portfolio than a true international diversifier, NZAC is the fund for you.

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.