Targeted Mining ETFs that Benefit from Electric Vehicle ESG

A rare earth miner-related exchange traded fund was among the hardest hit on Friday, but the sector has enjoyed a stellar run on the heels of renewed interest in clean energy technologies.

The VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) fell 3.1% on Friday, testing its short-term support at the 50-day simple moving average. REMX has increased 20.6% year-to-date and has advanced 128.2% over the past year.

Rare earth miners and uranium producers have enjoyed the flood of new money going into electric vehicles and environmental, social, and governance investment themes, Bloomberg reports.

Lithium producers have traditionally benefited from the growth in the electric vehicle market and the broader green energy push that has raised demand for lithium-ion batteries. More recently, rare earth producers have also gained momentum amid the greater push toward electric vehicles, especially with the Biden administration targeting a zero-emission future more reliant on clean energy alternatives.

For example, shares of MP Materials Corp., the largest U.S.-based miner of rare earths, has gained fourfold since Joe Biden won the election four months ago.

MP is “a play on accelerating adoption of electric vehicles and electrification trends in wind turbines,” Morgan Stanley analyst Carlos De Alba said in a report on Tuesday. “If you like EV, you’ll love MP.”

So-called rare earth metals are incorporated in new technologies, from lithium-ion batteries to electric vehicles, wind turbines, and missile guidance systems. There is also limited global supply as only a handful of producers globally produce the metals. China controls the lion’s share of the sector’s production and capacity.

Looking ahead, the uranium sector could also gain momentum as some are speculating that large funds are probably slowly raising allocations to the sector.

“Uranium sector supply/demand balance is the tightest we’ve seen since pre-Fukushima,” GJL Research analyst Gordon Johnson told Bloomberg, referencing the 2011 nuclear catastrophe in Japan.

“When you add to this, uranium stocks are now gaining attention from ESG investors due to their low GHG footprint and quintessential role as a clean energy alternative, we see the set-up for incremental/new Uranium investments as opportune,” Johnson added, referring to greenhouse gas emissions.

ETF investors can also tap into the uranium mining sector through funds like the North Shore Global Uranium Mining ETF (NYSE: URNM) and Global X Uranium ETF (URA).

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