The spending forecasts for clean technology and renewable energy continue to be jaw-dropping. With that, the related investment implications are compelling.
Still, not all investors want to embraced dedicated clean tech or green energy exchange traded funds. There are avenues for market participants to participate in the upside offered by those industries without going “all in.” Consider mid-cap ETFs with an environmental, social, and governance (ESG) foundation — a boxed ticked by the Calvert US-Mid Cap Core Responsible Index ETF (CVMC).
As its name implies, CVMC is not a dedicated clean technology ETF, but it broadly focuses on responsible investing concepts. Plenty of those are linked to climate themes. Those inroads at pertinent amid bullish renewable spending as highlighted by the International Energy Agency’s (IEA) most recent World Energy Investment report.
“Annual clean energy investment is expected to rise by 24% between 2021 and 2023, driven by renewables and electric vehicles, compared with a 15% rise in fossil fuel investment over the same period. But more than 90% of this increase comes from advanced economies and China, presenting a serious risk of new dividing lines in global energy if clean energy transitions don’t pick up elsewhere,” according to the IEA.
CVMC Diversification Matters
While CVMC isn’t a dedicated renewable energy ETF, it has some advantages in terms of providing exposure to that theme. On a basic note, the fund has minimal exposure to fossil fuels equities.
Second, CVMC is a diverse mid-cap ETF. It holds north of 600 stocks, with none of those holdings exceeding a weight of 0.80%. That confirms not only that concentration risk is low, but also that CVMC has myriad avenues for delivering renewable energy exposure. That’s an important trait because the clean energy industry is evolving at a rapid pace.
“Clean energy is moving fast – faster than many people realise. This is clear in the investment trends, where clean technologies are pulling away from fossil fuels,” said IEA Executive Director Fatih Birol in a statement. “For every dollar invested in fossil fuels, about 1.7 dollars are now going into clean energy. Five years ago, this ratio was one-to-one. One shining example is investment in solar, which is set to overtake the amount of investment going into oil production for the first time.”
CVMC allocates 22% of its weight to industrial stocks — a sector with ample renewable energy exposure. Additionally, utilities and materials names combine for over 11% of the ETF’s roster. Both of those groups have credible clean energy access of their own.
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