China's Aggressive Stance on Clean Energy Sets Up This ETF

China has aggressive plans to shore up its clean energy image, and the country is moving towards this goal with tangible action. This all paves the way for investing opportunities, namely in clean energy technology.

“China plans to generate one-third of its electricity from renewables by 2025. The country already adds more green energy capacity annually than all other countries combined,” a Foreign Brief article explained. “It now accounts for over three-quarters of new solar and wind capacity and 80% of new hydropower capacity added annually. In 2021 alone, China added 17 gigawatts to its offshore wind energy grid—seven times that of the rest of the world combined. This resulted in 50% of the global offshore wind capacity now lying in China.”

The article noted that China is already making strides with regard to alternative energy transportation methods like electric vehicles (EVs), accounting for 98% of the global market share thanks to a fleet of half a million EV buses. Though the country is still estimated to be the largest polluter globally, it’s taking the necessary steps to reverse this stigma.

“Nonetheless, China’s pace of adopting renewables is impressive,” the article said. “Much of the rest of the world is now also looking to China for their own goals in energy transition, as it has become the undisputed champion of green technology supply chains.”

1 ETF to Capture the Growth

With China squarely focused on its clean energy goals, this sets it up nicely for an exchange traded fund (ETF) to capture the growth. As such, consider 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.
  • Benchmarked to an MSCI ESG Index: MSCI is the #1 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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