China is making aggressive plans to shift its stigma as a major polluter to a leader in clean energy investment. A $546 billion investment in clean energy is certainly a step in the right direction.
It’s not something the second-largest economy just decided to do in the past year. China has already been looking to make bold maneuvers in order to reduce its carbon footprint — in effect, it’s even looking to surpass the United States in terms of clean energy investment.
“China once again topped the world in clean energy investments last year, a trend that could challenge U.S. efforts to develop more homegrown manufacturing,” a Scientific American article said.
“Nearly half of the world’s low-carbon spending took place in China, according to a recent analysis from market research firm BloombergNEF,” the article added further. “The country spent $546 billion in 2022 on investments that included solar and wind energy, electric vehicles and batteries.”
An ETF Opportunity for Clean Energy in China
While there are a number of ETFs on the market that can offer clean energy exposure, getting China-specific holdings requires a more unique skew. Fortunately, investors can encapsulate this thematic exposure via the KraneShares MSCI China Clean Technology Index ETF (KGRN).
KGRN is benchmarked to the MSCI China IMI Environment 10/40 Index, which provides exposure to Chinese companies that focus on clean technology and contribute to a more environmentally sustainable economy. The index is comprised of securities that derive at least 50% of their revenues from environmentally beneficial products and services.
The index is based on five key clean tech themes. These themes include alternative energy, water sustainability, green buildings, pollution control/prevention, and efficient energy sources. All these themes encapsulate the popular trend of environmental, social, and governance (ESG) investing.
Per its product website, KGRN provides:
- Access to China’s fast-growing environmental protection industry that has rapidly become the largest renewable energy market in the world.
- Exposure to companies that stand to benefit from China’s increased focus and spending on clean energy technologies.
- Benchmarking to an MSCI ESG Index. MSCI is the number one index provider for socially responsible investment (SRI), corporate governance, and ESG indexes, according to a 2015 survey of 1,200 participants conducted by SRI Connect and Extel.
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