One of the clearest trends to emerge in the world of exchange traded funds last year was the stellar performances delivered by renewable energy funds, such as the ALPS Clean Energy ETF (ACES).
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.
While it’s not uncommon for one year’s leaders to not replicate those performances the following year, many market observers are bullish on green energy plays for 2021.
“Nearly all the top-performing exchange traded funds of 2020 plugged into the digitalization or ‘greening’ of the economy,” reports Matt Krantz for Investor’s Business Daily. “Sure, these shifts were already underway. But the coronavirus pandemic put the movement to mobile apps and cloud computing into hyperdrive.”
Going Green Means Green with ACES
Interestingly, the COVID-19 pandemic is bolstering the case for renewable energy and electric vehicle adoption, which could provide a runway for long-term growth with ACES. Other data points confirm the long-term appeal of ACES.
“Global investors managing nearly $7tn (£5.2bn) of assets plan to almost double their spending on renewable energy infrastructure over the next five years amid deepening concerns over the fossil fuel industry’s climate plans, according to a report,” an article in The Guardian said. “A survey of institutional investors found that they are planning to increase their renewable energy investments from 4.2% of their overall portfolio to 8.3% in the next five years and 10.8% within the next decade to about $742.5bn.”
Adding to the ACES thesis is that renewable energy adoption is a truly global theme with help coming from some of the world’s largest economies.
“And Joe Biden’s 2020 U.S. Presidential election win put a firm footing under clean energy ETF stocks. Biden has vowed to accelerate the nation’s movement to cleaner forms of energy. Meanwhile, China, one of the largest remaining burners of coal, claims it will speed up its shift to cleaner energy,” according to IBD.
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.
