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.
Clean energy thematic boosted by EU’s forced shift to renewables
The Russia/Ukraine crisis has been front and centre of investors’ minds as trade sanctions and supply chain disruptions start to impact company earnings. Russia is the largest supplier of gas, crude oil and coal into the EU, and is a major supplier of nickel (used in EV batteries) and aluminium (used in solar panel frames, cabling and EVs). The knock-on effect has resulted in skyrocketing energy prices and booming nickel and aluminium market.
President Putin’s war on Ukraine looks to have triggered a rapid reshaping of European energy policy. While every EU member has its own decarbonisation plans, many have elected to fast-track these plans to end energy reliance on Russia and opt for “sustainable” energy solutions. (In other words, the EU says it will “decarbonise” as soon as possible; but Germany and Austria, for example, are caught in a bind, needing Russian gas: Germany says it faces the choice between Russian gas and recession.)
And this move can be seen in the VanEck Global Clean Energy ETF (CLNE) which is up 16.23% as at 15 March 2022. The portfolio is broken up into the following sectors: Electrical Equipment 29.9%, Independent Power Producer & Energy Traders 28.4%, Semiconductors & Semiconductor Equipment 23.7%, Electric Utilities 12.6%, Oil, Gas & Consumable Fuels 5.4%.
According to VanEck, “By 2026, the capacity for global renewable electricity is expected to rise more than 60 per cent above its pre-pandemic levels in 2020. The International Energy Agency (IEA), meanwhile, anticipates that renewables will make up almost all (95 per cent) of the increase in global power capacity through to 2026.”
This rise is being witnessed across the board. Clean energy stocks have risen sharply over the last few months as sanctions against Russian went into effect, cutting energy exports and sending global energy prices higher. CLNE is a diversified exposure that can include companies involved in:
- biofuel & biomass energy production, technology & equipment;
- ethanol & fuel alcohol production;
- fuel cells technology & equipment;
- geothermal energy production;
- hydro electricity production, turbines & other equipment;
- solar energy production, photo voltaic cells & equipment; and
- wind energy production, turbines & other equipment.
The prioritisation of climate goals in the EU and the push to decarbonise is now more sought-after than ever before. The reliance on Russian gas and oil imports accounts for 37 per cent of gross electricity consumption in the EU alone. VanEck says, “This trend towards clean energy stocks too will likely gain momentum as energy consumers seek substitutes for fossil fuels and the demand for renewable energy rises to meet climate change carbon emissions targets. Amid the energy supply shock, VanEck’s Clean Energy ETF (ASX:CLNE) has surged over 16% since the Russian invasion of Ukraine.”
VanEck comments, “Clean energy assets are typically pro-cyclical and tend to over-perform when the economic cycles expand and capital spending on renewable energy increases. We could therefore see clean energy companies likely to rally in the months ahead as the world seeks cleaner and more reliable supplies of energy.”
