The ALPS Clean Energy ETF (ACES) and is renewable energy ETF brethren are on torrid paces this year, but ACES could be in the early innings of what could be a lengthy boom. Believe it or not, there could be some help from the coronavirus pandemic.
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.
“As companies and governments try to steady themselves from the coronavirus crisis, investors and executives in the renewable energy sector say business is chugging along, attracting new money and players as it goes,” reports S&P Global Market Intelligence. “The momentum is being fueled by a potent mix of falling technology costs and popular support for green government and corporate policies and sustainable investing.”
ACES Looks Good for the Long Term
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.
“Outside of equity markets, funding for renewable energy projects rose 5% during the first half of 2020 despite economic and financial disruptions from the pandemic as an investment spike in the offshore wind market offset sharp declines in other sectors,” reports S&P Global Market Intelligence.
ACES’ components provide the products and services that enable the evolution of a more sustainable energy sector. The green energy companies are engaged in renewable energy sources, including solar power, wind power, hydroelectricity, geothermal energy, biomass, biofuels, and tidal/wave energy; clean technologies, including electric vehicles, energy storage, lithium, fuel cell, LED, smart grid, and energy efficiency technologies; and other emerging clean energy activities and technologies.
“The time for renewables is now,” James Robo, chairman, President and CEO of NextEra Energy Inc., said July 24 on a call with analysts. “Frankly, the economics and the need to … decarbonize not only the electric sector but the rest of the sectors of the economy … transcend what happens in elections.”
Other alternative energy ETFs include the First Trust Global Wind Energy ETF (FAN) and the SPDR Kensho Clean Power ETF (CNRG).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.