Clean energy has been one of the prime plays in the ETF landscape this year, and with an incoming Biden administration, more strength could be on the way. Both the Invesco Solar ETF (TAN) and VanEck Vectors Low Carbon Energy ETF (SMOG) have already delivered massive gains this year.
TAN, which started back in 2008, seeks to track the investment results of the MAC Global Solar Energy Index, which is designed to provide exposure to companies listed on exchanges in developed markets that derive a significant amount of their revenues from the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products.
The fund is up over 200% since retracing back to its pre-pandemic levels:
SMOG seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Ardour Global IndexSM (Extra Liquid). “Low carbon energy companies” refers to companies primarily engaged in alternative energy, including renewable energy, alternative fuels and related enabling technologies (such as advanced batteries).
Like TAN, SMOG rebounded from the pandemic sell-offs and never looked back since, rising over 100% this year:
More Tailwinds Ahead for Clean Energy
A Biden administration could set the space on fire–as if it wasn’t already.
“A Joe Biden win combined with the rapid decline in renewable energy costs has contributed to further appreciation for solar and clean energy funds,” said Rene Reyna, head of thematic and specialty product strategy at Invesco, via a Financial Times article. In the wake of this year’s strong performance, “pullbacks should be expected”, Mr. Reyna said, but he added that “the underlying fundamentals within the renewable energy sector support our view that we are in the early stages of a longer-term secular growth trend.”
Per the article, global funds with ESG assets “have surged more than 50 per cent, beyond $1.3 trillion, since the end 2019, according to the Institute of International Finance, which said the trend had accelerated in recent weeks as investors anticipated active support from the incoming Biden administration.”
“Companies with the highest ESG ratings collectively outperformed” during the pandemic market crash in March and beyond, said Romain Boscher, global chief investment officer for equities at Fidelity International. “We believe ESG adoption will only accelerate in 2021, especially as climate change moves up the agenda in the US.”
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