Many advisors are surprised to learn the energy transition is actually bullish for commodities.
While it may seem counterintuitive, a smooth energy transition will require ensuring supply reliability through continued investment in oil infrastructure. The International Energy Agency (IEA) has estimated that oil demand will continue for over 10 years.
Global “net-zero” efforts should also lead to higher demand for industrial metals, because metal consumption in renewables is five to seven times higher than traditional power, according to Goldman Sachs’ 2022 outlook: cyclical weakness priced in, structural upcycle remains intact.
Serving as an additional catalyst is an accelerating demand for electric vehicles, in which demand continues to surprise the upside while supplies remain constrained.
Investors looking to gain economic exposure to the commodities used in the production of electric vehicles, as opposed to the EV companies, should consider the Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT), an actively managed ETF that charges a 59-basis point expense ratio.
EVMT offers access to upstream electric vehicle transition themes by offering exposure to commodities critical to producing electric vehicles, according to a statement from the firm.
This approach allows investors the ability to focus solely on industrial metals, rather than a midstream investment in companies that manufacture batteries and electric vehicles.
EVMT invests in derivatives and other financially linked instruments to gain exposure to metals critical to electric vehicle production. These metals currently include aluminum, cobalt, copper, iron ore, nickel, and zinc. The active structure of the ETF gives it the potential to expand both the number and type of metals included in the ETF as electric vehicle production and technology evolve, according to a statement from the firm.
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