State Street SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX)

The SPDR S&P 500 Fossil Fuel Reserves Free ETF holds most of the S&P 500, but with a screen: it excludes companies that derive a material part of their value from proven fossil fuel reserves — oil fields, gas deposits, and coal mines in the ground. It lets investors own American large-caps while avoiding that exposure.

The exclusion methodology

The fund starts with the S&P 500 and applies a filter. Any company with proved reserves of crude oil, natural gas, coal, or other fossil fuels above a certain threshold is removed. The definition matters: the fund does not exclude every company with any oil-and-gas operations; it targets those whose business model revolves around extracting or selling fossil fuels.

This filters out most traditional energy companies — the oil majors, the independent oil and gas explorers, the pipeline operators, and the coal miners. The fund maintains its S&P 500 stock counts in other sectors: technology, healthcare, finance, consumer goods, industrials, and utilities. Those utilities that own power plants fueled by coal or gas may stay or go depending on whether they hold significant reserves themselves.

The exclusion is applied periodically as the underlying S&P 500 shifts and company reserves change. State Street manages the screening and rebalancing to keep the fossil-fuel-reserves component low and the tracking close to the index’s performance aside from the excluded companies.

Who buys and why

Investors with environmental or values-based constraints use this fund to hold diversified S&P 500 exposure without explicitly backing fossil fuel extraction. Pension funds with climate commitments, and individuals who want to align holdings with climate concerns, are the primary audience. The fund lets someone own Apple, Microsoft, Johnson & Johnson, and JPMorgan while saying no to Exxon or Chevron.

The pitch is simple: get broad-based American equity exposure without the fossil fuel tilt. For investors who believe climate change is a material long-term risk to the economy, removing the most direct exposures to fossil fuel production is a logical step, even if the fossil fuel economy remains woven through the wider economy.

Performance and tradeoffs

Because energy stocks are a meaningful chunk of the S&P 500 — and because some years they lead, other years they lag — the fossil-fuel-free version will sometimes outperform the plain index and sometimes underperform it. In years when oil prices surge and energy stocks rally, the exclusion strategy will lag. In years when fossil fuels are beaten down and technology leads, the fund can outpace.

Over the long term, the fossil-fuel-free universe is still large and diverse, so the fund captures most of the S&P 500’s return. The drag is the value forgone by excluding whatever fossil fuel stocks would have done that year. That is a tradeoff the investor is knowingly making.

Costs and comparison

The fund’s expense ratio is comparable to other style-tilted S&P 500 ETFs. The primary cost beyond the expense ratio is the opportunity cost of being without fossil fuel exposure in years when energy stocks outperform. There is no hidden fee for the exclusion; the expense ratio already accounts for the management involved.

An investor choosing this fund should compare its historical return to both the plain S&P 500 and to other fossil-fuel-free indices and ETFs. The exclusion screen is not unique — several fund families offer similar products — so shopping for low costs and tight tracking is worthwhile.

The practical question

The exclusion is definite and auditable: a company either holds proved fossil fuel reserves above the threshold or it does not. It is not a judgment call or an ESG rating, which makes it clear and easy to understand. But it is also incomplete as an environmental measure. A company can have substantial fossil fuel operations and profits without owning the reserves themselves — a manufacturer of equipment for oil rigs, a bank financing fossil fuel projects, or an industrial firm that buys fossil fuel energy. This fund catches the direct play but not the indirect ones.

For investors who want to reduce fossil fuel exposure as part of a values-based or climate-conscious portfolio, this fund is a straightforward way to do it within the large-cap American equity space. Assessing it means comparing its returns to alternatives and asking whether the exclusion matches your actual climate or values goals.