Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Battery ETF adds ESG screening amid surge in climate interest
The exchange-traded fund (ETF) sector has been among the biggest winners of the pandemic, seeing significant inflows and more investors entering the market. Among the most popular strategies to come to market have been so-called ‘thematic’ ETFs, which offer exposure to a secular trend or opportunity.
Over the last few years the success of these thematics has been somewhat hit-and-miss, with inflows mixed depending on the underlying strategy and timing. One of the most popular, however, has been ETF Securities Battery Tech and & Lithium ETF with the aptly named ASX code ACDC. The ETF, which invests along the entire battery supply chain, has reached more than $500 million in assets under management.
As most investors would know, each of these ETFs tracks an underlying benchmark, some of which are customised to offer an appropriate exposure to a cohort of funds. In the case of ACDC it is the Solactive Battery Value-Chain Index. Therefore, changes in the index have an important impact on the underlying strategy.
This week, ETF Securities announced that the strategy was being “recharged” through the addition of exclusion criteria that will filter out companies that do not meet ESG standards. ETFS highlights that the new ESG standards “align ACDC with the policy approach of the Albanese government, which has made the growth of the electric vehicle market a key part of its emissions reduction and renewable energy plan.”
ETFS says “The new government has committed to bring down the cost of electric vehicles by exempting many of them from import tariffs and fringe benefits tax,” which is expected to see continued growth in lithium miners and other parts of the supply chain. Top holdings at present include Western Australian lithium miners Mineral Resources and Pilbara Minerals, Dutch specialty metals producer AMG Advanced Metallurgical, and EV manufacturers Renault SA and Hyundai Electric & Energy System Co.
According to the announcement, the index provider has included ESG activity screens with companies now screened for human rights, corruption, labour rights, weapons production, coal extraction and oil and gas production. Solactive has been guiuded by the UN Global Compact in including these screens.
ETF Securities’ head of distribution, Kanish Chugh, says: “This important change to the fund’s selection methodology follows years of feedback from clients. It is a recognition that investors keen on battery technology are usually environmentally-minded.”
