This ETF Offers Exposure to China's Clean Energy Emphasis

The global transition to alternative energy sources is evident in China’s push to lower its emissions output. Investment in clean energy can help propel the Invesco Global Clean Energy ETF (PBD), which offers country exposure to Chinese equities.

PBD offers exposure to the global clean energy index. This includes both U.S. and international stocks in the underlying portfolio. The ETF also diversifies across various types of clean energy, such as wind, solar, and hydro. This makes it an interesting option for those looking to bet on a clean energy boom but unwilling to make a concentrated bet on a specific subsector.

In terms of China-specific exposure, the fund’s country allocation is at around 9% as of November 24. One of the fund’s top holdings is XPeng Inc ADR. This company, headquartered in Guangzhou, designs and distributes electric vehicles. EVs are one of the sectors expected to see growth in the clean energy transition.

“The new analysis for Carbon Brief, based on official figures and commercial data, shows China’s CO2 emissions continuing to rebound from the nation’s ‘zero-Covid’ period, rising by an estimated 4.7% year-on-year in the third quarter of 2023,” Carbon Brief reported. “The strongest growth was in oil demand and other sectors that had been affected by pandemic policies, until the lifting of zero-Covid controls at the end of 2022.”

More Clean Energy Plans in the Works

China is just barely scraping the surface when it comes to cleaning up its act regarding CO2 emissions. More reductions are to come in 2024 and beyond, giving PBD tremendous growth opportunity in the long-term investment horizon.

In fact, China’s emissions reductions have been seeing massive growth over the last two decades. Almost 50% of PBD’s market cap allocation goes into small-cap exposure, so the growth potential in not only China’s clean energy sector but those worldwide give PBD tremendous upside.

“China’s CO2 emissions have seen explosive growth over recent decades, pausing only for brief periods due to cyclical shocks,” Carbon Brief added, noting that within the last 20 years, China’s “annual emissions from fossil fuels and cement have climbed quickly almost every year” and was only interrupted by an economic slowdown in 2015 to 2016, as well as in 2022.

PBD features over 100 holdings, again as of November 24, and has a 0.75% expense ratio. With a 30-day SEC yield of 0.65% yield, the fund offers a quarterly distribution.

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