Skyrocketing oil prices as countries seek to divest themselves of Russian oil in response to their invasion and continued war on Ukraine have gouged sectors and industries that were just beginning to recover from the COVID-19 pandemic’s effects. Brent crude oil reached prices last week that hasn’t been seen since just before the financial crisis in 2008 and sent gas prices soaring in the U.S. and Europe, reported the Financial Times.
Investors, facing the uncertainties of energy prices rising, even more, have been retreating on a large scale from industries that would be impacted by their reliance on oil, such as the airline industry. Airline companies are experiencing stock price plummets and yields climbing exponentially on their bonds at levels similar to the impacts seen at the onset of the pandemic in 2020.
“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” said economists at Goldman Sachs. They are currently forecasting that crude oil could hit as high as $175 a barrel.
Investing in the Clean Energy Transition Within Transportation
The market for clean energy is expected to grow from $408 billion to $1.2 trillion by 2027 with the U.S. green economy generating more than $1.3 trillion annually in revenue, according to IndexIQ, the firm behind the IQ Cleaner Transport ETF (CLNR).
CLNR seeks to capture this growth by providing investors exposure to companies globally that are focused on clean energy resources, transportation equipment and services, technology that makes transportation more efficient, and infrastructure components.
The fund is a dual impact one in that it has aligned with the National Wildlife Federation and donates a portion of CLNR’s management fees to NWF. CLNR focuses on the transportation industry, which makes up around 20% of emissions annually, and seeks to support the human interventions happening within the climate change arena to help reduce greenhouse gas emissions derived from fossil fuel use.
CLNR seeks to track the IQ Candriam Cleaner Transport Index which uses thematic selection to include companies involved in or related to activities that protect or achieve cleaner transportation technologies. This includes electric vehicles, bicycles, vehicle manufacturers, as well as multi-passenger vehicles, renewable energy productions in vehicles, sustainable mining for battery resources, and sustainable transportation infrastructure.
The fund invests across all caps globally and screens out companies that do not meet ESG criteria as well as an exclusionary screen. Companies are assigned a score based on their revenue, materiality score, and impact score, and the top 50-80 scoring companies are included in the index; the index is weighted using a modified market cap-weighting methodology with companies weighted a minimum of 0.25% and a maximum of 3% component weighted.
CLNR carries an expense ratio of 0.45%.
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