Opinion: This new ETF is buying the commodities that will power our carbon-free future
A new exchange-traded fund seeks to provide an easy way to invest in the raw materials needed to fuel the transition to cleaner energy.
The Harbor Energy Transition Strategy ETF RENW,
which was listed on July 14, will track the performance of the Quantix Energy Transition Index, whose three main commodity categories are metals used in the construction of new energy infrastructure, such as copper, aluminum and silver ; low-carbon assets such as natural gas that act as a bridge to a net-zero future; and carbon credits designed to encourage investment in clean energy.
The ETF, which is managed by a team of former Goldman Sachs commodities professionals at Quantix Commodities LP, invests in commodity futures, which sets it apart from similar funds, which primarily hold stocks.
Don Casturo, founding partner and chief investment officer at Quantix, says the industrial products needed to build the necessary infrastructure are well known. However, given where the energy transition is in the world, companies are still competing to be the dominant technology at the center of the transition, “making it difficult to choose the right mix of companies to invest in”.
Instead, he says, “direct investment in raw materials will help ease the transition, regardless of the ultimate dominant technology.”
Since the global financial crisis of 2008, the end of the last commodity boom and ultra-low interest rates, there has been little investment in commodities and a lack of innovation in financial products in the world. space, says Casturo. He attributes the recent rise in inflation to 40-year highs to a lack of supply of basic energy resources that has been exacerbated by the energy transition.
Most commodity indices are either broad and contain a range of natural resources, or heavily focused on fossil fuels. Existing commodity benchmarks such as the GSCI or the Bloomberg Commodity Index “are based on old-world energy sources,” Casturo says. “What we’re trying to achieve by launching an alternative index is one more index focused on where the world wants to go.”
Today, with an increased need to build more solar panels, charging stations, batteries and other devices to wean the world off fossil fuels and avoid the worst of climate change, the metals needed to enable the energy transition are becoming rare.
Kristof Gleich, President and CIO of Harbor Capital Advisors, pointed to data from the International Energy Association that an electric vehicle needs approximately six times as much copper, lithium, nickel, cobalt, manganese or graphite than an internal combustion engine.
“We are going to move away in the next 30 years from a world of hydrocarbons. And the amount of metals and minerals needed to do that is pretty hard to overestimate,” he says.
The fund will cost 0.80% to hold annually, making it a bit more expensive than other ETFs based on commodity indices.
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