In advance of Election Day, the ALPS Clean Energy ETF (ACES) gained over 20% in the prior 90 days. This timeframe, which includes plenty of positive polling data for Democratic nominee Joe Biden, confirms the correlations between renewable energy ETFs and Biden’s electoral fortunes.
ACES follows the CIBC Atlas Clean Energy Index. That benchmark is comprised of U.S.- and Canada-based companies that primarily operate in the clean energy sector. Constituents are companies focused on renewables and other clean technologies that enable the evolution of a more sustainable energy sector.
“Funds focused on sustainable investing are attracting record inflows as investors increasingly prioritize ESG metrics, or a company’s environmental, social and governance factors,” reports Pippa Stevens for CNBC. “Democrat Joe Biden’s ascent in the polls and his environmentally friendly proposals have driven more investors into climate-focused funds, some of which have seen their shares more than double this year.”
Coming up with the ACES
ACES takes a different approach than what is seen in other traditional clean energy ETFs. Many of the legacy funds in this space focus on one alternative energy concept, such as solar or wind power. Buoyed by double-digit growth rates in global solar installations over the next decade, ACES, with a substantial solar weight, could be a long-term winner.
Reports CNBC: “AUM in thematic funds focused on climate change and environmental opportunities has almost doubled this year and net inflows have accelerated in recent months,” RBC said in a recent note to clients. “This year the performance of the S&P 500 ESG factor … has been moving in sync with Biden’s odds in the betting markets.”
Important to the ACES thesis is that the ETF doesn’t necessarily need Biden to win to continue its ascent. Simple price action confirms as much as the the fund is higher by almost 83% over the past year, indicating it’s performed quite well with President Trump in the Oval Office.
Of course, there’s no denying a blue wave would help ETFs like ACES.
“We would expect the ESG risk factor to outperform under a Biden administration, given the more ESG-friendly policies emphasized in his plan,” notes RBC.
Other alternative energy ETFs include the First Trust Global Wind Energy ETF (FAN) and the SPDR Kensho Clean Power ETF (CNRG).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
