As the world continues to witness a transition from fossil fuels to alternative energy sources, there will also be a need for energy transition materials. This will come at an increased pace as global governments around the world are scrambling to achieve their lofty goals in order to reduce their carbon footprint.
“The 2020s started with the COVID-19 pandemic, fiscal and monetary stimulus far outpacing the GFC response, the Russia-Ukraine war, and the resultant fracturing of global supply chains, geopolitical reordering, and global hyperinflation,” a Sprott blog post noted. “The secular demand surge for critical minerals for energy transition was well underway due to the threat of climate change. But since the onset of the Russia-Ukraine war, deglobalization has accelerated and geopolitical tensions have risen. The need to quicken the global energy transition and secure critical minerals supplies has increased commensurately, and it comes on the heels of a decade that saw chronic underinvestment, which now magnifies the level of capital investment needed.”
“Although the demand growth rate for critical metals essential for the energy transition is expected to be high, these metals have other uses beyond the energy transition that are impacted by the economic cycle. In other words, the secular growth trend of critical metals can be amplified during a global cyclical economic upswing,” the blog added.
Capture the Growth Potential in This ETF
Given the potential in energy transition materials, consider the Sprott Energy Transition Materials ETF (SETM). The fund seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Energy Transition Materials Index, which is designed to track the performance of a selection of global securities in the energy transition materials industry.
Per the Sprott product website, the fund offers:
- pure-play access to a range of critical minerals necessary for the global clean energy transition.
- potential for explosive growth as the government looks to achieve its net-zero goals. Globally, $1.11T was invested in the energy transition sector in 2022. To meet net-zero targets, global investment may need to accelerate to a yearly average of $3.9T from 2023 to 2030.
- exposure to well-positioned companies that are upstream in the supply chain may be well-positioned to benefit from the increased investment in the critical minerals necessary for the clean energy transition
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