Three Green Energy ETFs Providing Compliance with UN Climate Change Conference

The 26th United Nations Climate Change Conference (or COP26 Summit) kicked off on October 31 in Glasgow, Scotland. This is why there are a lot of “green talks” all around us. There are a few ETFs that may benefit from the rising interest in alternative energy. Some of them are introduced below:

ALPS Clean Energy ETF

Price: $74.89;

Annual trading range: $54.27-101.72;

Dividend Yield: 0.56%;

Expense ratio: 0.55%.

ALPS Clean Energy Fund (ACES) invests in Canadian and US companies with a focus on clean energy. The fund was listed in June 2018. The ACES portfolio comprises 40 components of the Atlas Clean Energy Index. Its ten largest holdings represent about half of the fund's net worth of $1.02 billion. Capital is split between solar (23.95%), wind (20.18%), EV/energy storage (13.34%), efficiency solution providers, LEDs, and smart grid (10.50%) and fuel cell manufacturers (9.88%).

The list of investments is topped by the electric car giant Tesla (TSLA); hydrogen fuel cell supplier Plug Power (PLUG); Sunrun (RUN), a solar PV module manufacturer; First Solar (FSLR); and solar and energy storage solutions provider Enphase Energy (ENPH).

Over the past 12 months, the stock rose by 27.5%, but since January it has been hovering near its flatline responding to the overall lost momentum of the broad market. As ACES is currently trading 28% below its February peak, long-term investors may consider buying at current levels.

KraneShares Global Carbon ETF

Price: $41.39

Annual trading range: $18.88-43.37;

Expense ratio: 0.78%.

According to the Environmental Protection Fund (EDF):

The KraneShares Global Carbon ETF (KRBN) provides indirect access to the carbon futures market. The foundation of the fund is the IHS Markit Global Carbon Index, which covers the European Union (EUA) quotas, the Regional Greenhouse Gas Initiative (RGGI) and the California Carbon Allocations (CCA). Since its debut in July 2020, the fund has raised $1.03 billion. KraneShares Global Carbon ETF has exceeded $500 million in assets under management in its first year of operation and also returned investors +75.73% over that same period. For reference, KRBN came to market on July 30, 2020. KRBN aims to track the IHS Markit's Global Carbon Index, which offers a wide-ranging exposure to cap-and-trade carbon allowances by following the most traded carbon credit futures contracts.

Fund manager’s note: “…as of December 31, 2020, the global price per ton of carbon was $ 24.05. It is estimated that in order to meet the global warming limit of 1.5 ° C, the price of quotas will need to rise to $ 147 per tonne of CO2. ”

In other words, KRBN may be suitable for investors looking to enter the carbon market (especially in Europe). If a business is emitting large quantities of polluting substances, it may have to buy relevant quotas on the open market. As the cost of carbon emissions rises, KRBN typically also appreciates, while companies with a heavy carbon footprint suffer.

As we know, Tesla (TSLA) generates significant profits by selling its own non-existent emission quotas to other, “less green”, producers. According to Q3 2021 results, this item brought Tesla $279 million in additional earnings.

This year, KRBN has appreciated by over 68%. However, one needs to be aware that the high share of the KRBN portfolio in the EU companies makes it more vulnerable to EURUSD exchange rate fluctuations. Thus, KRBN may suffer if the US dollar strengthens strongly against the single European currency.

Invesco MSCI Green Building ETF

Price: $23.96;

Annual trading range: $23.10-26.81;

Dividend Yield: 2.88%

Expense ratio: 0.39%.

Invesco MSCI Green Building ETF (GBLD) provides access to sustainable building construction businesses. They are focused on the real estate sector and are involved in the design, construction, or redevelopment of environmentally certified properties.

GBLD is currently investing in 83 holdings of the MSCI Global Green Building Index. More than 93% of the fund's assets belong to the real estate sector, followed by consumer companies (6.33%). The fund was launched in April 2021 and it has $4.4 million under management.

The list of holdings is featured by the real estate investment fund Alexandria Real Estate Equities (ARE), specializing in a mixture of biological sciences and high technologies products; Hong Kong Sun Hung Kai Properties (SUHJY); Boston Properties (BXP) real estate fund, which owns offices, residential real estate and hotels; Japan's REIT Nippon Building Fund (T: 8951); and French real estate giant WFD Unibail Rodamco (UNBLF). Since its debut (at the end of April), GBLD shares declined by about 3% offering an interesting entry point.