URTH vs. NZAC: Similar Results But Different Fees

SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) and iShares MSCI World ETF (NYSEMKT:URTH) differ on cost, yield, and coverage: NZAC is cheaper and climate-focused, while URTH spans more developed-market holdings, with superior recent performance and liquidity.

Both funds aim to give investors global equity exposure, but their approaches diverge. NZAC tracks a climate-aligned version of the MSCI ACWI index, integrating environmental screens and covering both developed and emerging markets. URTH, in contrast, tracks developed markets only and omits sustainability screens, making this a match-up of climate-conscious breadth versus conventional global reach.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

URTH is notably more expensive, with a 0.24% expense ratio compared to NZAC's 0.12%, and it pays out a smaller dividend yield. For those focused on cost and income, NZAC looks more affordable and offers a higher payout.

Performance & risk comparison

What's inside

URTH holds 1,322 developed-market stocks spanning technology (27%), financial services (16%), and industrials (11%), with top positions in Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). Its 13.9-year track record and broad sector spread make it a staple for those seeking developed-markets exposure without climate or ESG overlays.

NZAC, by comparison, holds 687 stocks but covers both developed and emerging markets, with a heavier tilt toward technology (31%). Its top holdings mirror those of URTH but with a climate-focused, ESG-screened approach. This makes NZAC potentially more attractive to investors prioritizing sustainability, although its assets under management (AUM) remain significantly smaller.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

From the standpoint of their composition, URTH and NZAC are remarkably similar. As mentioned above, the top three holdings in each fund are identical, and their respective weights in the portfolio are also similar. That said, even expanding out to the top 10 holdings, the commonalities are stark.

The primary difference between these funds lies in their stated goals. While URTH offers exposure to a broad range of international stocks, NZAC has an explicit focus on investors who want to reduce their exposure to climate risk, hence the reference to the Paris Climate Agreement in the fund's name. Each investor needs to decide if that distinction matters to them.

The distinguishing factor that could have the most significant impact on investors' returns is the difference in fees between these funds. With an expense ratio double that of NZAC, URTH doesn't appear to offer much by way of performance to justify the difference in fees.

Unless an investor has a clear desire to invest in or avoid a climate-focused ETF, the similarities between these funds make the fee the most important factor to consider when choosing where to invest their dollars. Over the long term, two funds with similar performance will yield noticeably divergent results for investors due to the difference in fees.

Glossary

ETF: Exchange-traded fund, a pooled investment that trades on stock exchanges like a single stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund, expressed as a percentage of its current price.
Beta: A measure of a fund's volatility compared to the overall market, often the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages.
Climate Paris Aligned: Refers to funds tracking indexes designed to align with the Paris Agreement's climate goals.
ESG: Environmental, Social, and Governance; criteria used to evaluate a company's sustainability and ethical impact.
Developed markets: Countries with advanced economies and established financial markets, such as the US, UK, and Japan.
Emerging markets: Nations with developing economies and financial systems, often offering higher growth but more risk.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
Liquidity: How easily a fund's shares can be bought or sold without affecting its price.
Sector spread: The distribution of a fund's investments across different industry sectors.