A fter more than a year of disappointment, there’s renewed momentum for climate-related exchange-traded funds.Believe it or not, Capitol Hill deserves the credit.
Sen.Joe Manchin (D-WV) and Senate Majority Leader Charles Schumer (D-NY) have an agreement in place that opens the door to hundreds of billions worth of climate-related spending.It’s politics, so there are still hurdles to clear, but to some extent, this is what investors were banking on when President Biden was campaigning in 2020 .
Back then, climate ETFs soared seemingly every time a favorable poll emerged for then candidate Biden.However, with wafer-thin majorities in both houses of Congress, investors embracing climate ETFs have been disappointed.Add to that, growth and technology stocks – key constituencies in climate ETFs – faltered in the first half of 2022.
In other words, renewable energy equities have more political correlations than investors realize, and as a result, these names giveth on speculation and taketh away on what can be harsh realities.
Perhaps this time will be different and Congress will get the job done, potentially boosting the following climate ETFs.
Goldman Sachs Future Planet Equity ETF (GSFP) The Goldman Sachs Future Planet Equity ETF ( GSFP ) focuses on companies with explicit decarbonization objectives, making it highly relevant in the climate ETF conversation.Add to that, GSFP is actively managed, which is a rarity in this category, but potentially advantageous nonetheless.
As an active fund, GSFP can avoid controversies such as greenwashing, ensuring investors get a more pure approach to climate investing.Those are coveted, useful characteristics.
“Globally, companies are under pressure from their shareholders, employees and consumers to engage ethically from an ESG perspective,” noted Luke Barrs , Goldman Sachs head of client portfolio management.“We believe those that are not, will need to change fast.
The tech sector is a good example of one area leading the charge – many of the Big Tech names already use renewables for powering their servers.Companies will be key in driving innovation and creating new products and services to help deliver positive environmental change.”
SPDR Kensho Clean Power ETF (CNRG) The SPDR Kensho Clean Power ETF ( CNRG ) is a prime example of an ETF that is clearly responsive to encouraging climate headlines emanating from Capitol Hill.That much was on display on Thursday when the fund surged on the aforementioned Senate news.
CNRG is highly relevant in this conversation because it’s a diverse fund with exposure to hydrogen, solar and wind equities and more, making it a likely beneficiary of widespread government climate spending.It’s also clear CNRG has a friend in President Biden.
“Our national security is at stake as well,” said the president.“Extreme weather is already damaging our military installations here in the States.
And our economy is at risk.
So we have to act.Extreme weather disrupts supply chains, causing delays and shortages for consumers and businesses.Climate change is literally an existential threat to our nation and to the world.”
VanEck Green Metals ETF (GMET) The VanEck Green Metals ETF ( GMET ) is essential in the climate ETF discussion because its member firms mine and produce the metals that are essential to powering renewable energy products and clean energy technology.
It can be inferred from that as spending on renewable energy increases, a runway for growth could be provided to GMET member firms.After all, solar panels, wind turbines and the like don’t work without the materials produced by GMET holdings.
“Many secular trends have driven increased demand for green metals such as copper, lithium, and rare earth elements in recent years, and that demand is only expected to increase moving forward,” wrote Brandon Rakszawski , VanEck senior product manager.“Technological advancements—including those technologies and applications needed for the transition from fossil fuels to a low carbon economy—are expected to continue to fuel the next wave of demand.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc..
