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

The State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NASDAQ:NZAC) provides a climate-focused global equity strategy, while the iShares Core MSCI Emerging Markets ETF (NYSEMKT:IEMG) offers broad, low-cost exposure specifically to developing market stocks.

The iShares fund is a staple for those seeking growth in emerging economies like China and India. In contrast, the State Street fund takes a wider global view, filtering both developed and emerging markets through a climate lens aligned with the Paris Agreement.

These funds serve distinct roles in a portfolio, making their differences in geographic scope and sector concentration particularly important for long-term investors who prioritize specific environmental goals or high-growth emerging market access.

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.

IEMG carries a lower expense ratio of 0.09% compared to 0.12% for the State Street fund. In terms of income, the iShares ETF has delivered a higher payout to shareholders, with a trailing-12-month dividend yield of 2.20% versus 2.00% for the climate-focused fund.

Performance & risk comparison

What's inside

The State Street fund holds 630 positions and aims to reduce exposure to physical climate risks while targeting sustainable opportunities. Its sector allocations include technology at 36%, financial services at 17%, and industrials at 10%. Its largest positions include Nvidia at 5.97%, Apple at 4.85%, and Microsoft at 3.13%. This ETF was launched in 2014, uses an ESG screen to select holdings, and paid $0.94 per share over the trailing 12 months.

The iShares fund tracks 2,658 stocks across large, mid, and small-capitalization segments. Its sector focus tilts toward technology at 42%, financial services at 17%, and consumer cyclicals at 9%. Top holdings include Taiwan Semiconductor Manufacturing at 12.71%, Samsung Electronics at 7.00%, and SK Hynix at 5.51%. The fund was launched in 2012, does not use specific ESG filters, and has a trailing-12-month dividend of $1.85 per share.

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What this means for investors

Investors seeking exposure to international stocks may want to consider the State Street SPDR MSCI ACWI Climate Paris Aligned ETF (NZAC) and iShares Core MSCI Emerging Markets ETF (IEMG). Which to choose depends on some key considerations.

NZAC offers stocks across both developed and emerging markets. It holds a far smaller number of equities than IEMG because it targets companies that reduce exposure to the risks of climate change while increasing exposure to sustainable investment opportunities. The fund is heavily tilted towards U.S. stocks with this geography comprising 64% of the holdings.

IEMG focuses only on emerging markets, which offer high-growth economies in exchange for greater volatility and risk. For instance, 18% of the fund is comprised of stocks in Chinese companies, exposing you to geopolitical risk given the rollercoaster relations between the U.S. and China over issues such as AI and tariffs. At the same time, its far larger AUM grants it high liquidity, and its expense ratio is significantly lower.

NZAC is ideal for investors who want to target companies concerned about climate change and wish to pursue opportunities arising from the transition to a lower-carbon economy. IEMG is a solid ETF for those who seek emerging markets exposure.

Robert Izquierdo has positions in Apple, Microsoft, 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.