The iShares Paris-Aligned Climate Optimized MSCI USA ETF (PABU – Free Report) was launched on 04/08/2022, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box – All Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $2.68 billion, which makes it one of the larger ETFs in the Style Box – All Cap Blend. PABU, before fees and expenses, seeks to match the performance of the MSCI USA CLMT PARIS ALGN BNC EXT SLCT ID.
The MSCI USA Climate Paris Aligned Benchmark Extended Select Index composed of U.S. large & mid-capitalization stocks designed to be compatible with the objectives of the Paris Agreement by following a decarbonization trajectory, reducing exposure to climate-related transition & physical risks & increasing exposure to companies favourably positioned for the transition to a low-carbon economy.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.10% for PABU, making it one of the least expensive products in the space.
It’s 12-month trailing dividend yield comes in at 0.86%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PABU, it has heaviest allocation in the Information Technology sector –about 47.7% of the portfolio –while Real Estate and Financials round out the top three.
When you look at individual holdings, Nvidia Corp (NVDA) accounts for about 10.07% of the fund’s total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
The top 10 holdings account for about 46.25% of total assets under management.
Performance and Risk
The ETF has added about 10.2% so far this year and was up about 25.84% in the last one year (as of 06/02/2026). In the past 52-week period, it has traded between $64.16 and $80.13
PABU has a beta of 1.05 and standard deviation of 15.87% for the trailing three-year period. With about 135 holdings, it effectively diversifies company-specific risk .
Alternatives
iShares Paris-Aligned Climate Optimized MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box – All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard ESG U.S. Stock ETF Shares (ESGV) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. Vanguard ESG U.S. Stock ETF Shares has $13.34 billion in assets, iShares ESG Aware MSCI USA ETF has $17.66 billion. ESGV has an expense ratio of 0.09% and ESGU changes 0.15%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – All Cap Blend
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
