For investors, a plus derived from the clean tech/green energy movement is a seemingly ever-increasing number of options, including both individual stocks and exchange traded funds.
As such, many of the clean energy ETFs investors gravitate towards are equity-based products, but there are options to consider, particularly for market participants looking for some protection against stubbornly high inflation.
Some of the ETFs have track records of several years while others are new products. However, all qualify as unique approaches to climate change and net-zero investing. Additionally, many of these ETFs are relevant right here and now. Let’s examine a few of the more compelling options here.
KraneShares Electrification Metals ETF (KMET)
The KraneShares Electrification Metals ETF (KMET), which follows the Bloomberg Electrification Metals Index, is unique because it’s something of a commodities-based on the electric vehicle boom. Experienced investors know producing non-gas vehicles is commodities-intensive and some newer ETFs, including, which debuted last October, are levered to that trend.
The metals represented in KMET are aluminum, copper, nickel, zinc, cobalt and lithium – each of which are essential in the EV production process. Copper and nickel combine for about 49% of the ETF’s roster, which is a point worth noting because those are among the most liquid commodities found in KMET’s index.
Due to declining prices and governments offering tax incentives to buyers, EV adoption is growing the world over. That means long-term supply/demand dynamics favor the metals represented in KMET.
“Copper is expected to be the most valuable among these key metals,” noted KraneShares. “According to BNEF, the price paid for the metal is expected to reach 5.5 times today’s market value by 2050. Other metals markets are also expected to grow substantially between now and 2050. Aluminum prices are expected to increase by 2.8 times, lithium prices are expected to increase by 7 times, and Nickel prices are expected to increase by 5 times.”
VanEck Green Infrastructure ETF (RNEW)
The VanEck Green Infrastructure ETF (RNEW) is a more traditional approach to renewable energy investing as it is an equities-based, passive ETF, but its investment objective is fresh. Tracking the Indxx US Green Infrastructure-MCAP Weighted Index, RNEW lives up to its billing as a green infrastructure fund, providing investors with access to a segment that only recently burst onto the scene.
With that, RNEW is new itself – it debuted last October, but it’s relevant over the near-term and long-term because demand for green fuels is rising and green infrastructure has the backing of big companies and governments.
“The adoption of green fuels has been increasing in recent years due to growing concerns over the environmental impact of traditional fossil fuels,” observes Nick Frasse, Van Eck associate product manager. “According to a recent IEA report from 2021, the global green fuels market is expected to grow at a compound annual growth rate (CAGR) of over 9% between 2021 and 2026, driven by rising demand for clean energy and supportive government policies.”
KraneShares California Allowance Strategy ETF (KCCA)
The KraneShares California Allowance Strategy ETF (KCCA) provides investors with exposure to the carbon offset market, specifically the California Carbon Allowances (CCA) cap-and-trade market.
There are broader alternatives in this category, including several in the KraneShares stable, but KCCA’s focus on the Golden State is relevant because California boasts one of the progressive climate agendas of any region in the world. Additionally, the state is in the process of update its carbon offset guidelines, meaning there could be near-term catalysts afoot for KCCA.
“A recent update to its Climate Change Scoping Plan, the state’s overarching plan to meet its emissions targets, called for increasing the stringency of its 2030 emissions target that determines cap-and-trade supply,” according to KraneShares research. “Since then, key policymakers have indicated that the cap-and-trade program will be recalibrated to be more aggressive as soon as 2025. Additionally, they are considering other revisions to address the market’s historic surplus and future carbon offset use.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
