Industry Updates

Clean energy ETFs bounce back on China and US windfall

Growing rate cut expectations also boosted the sector

Lauren Gibbons

solar panels on a roof

Clean energy ETFs led the gains in May after major developments in both China and US boosted the sector.

China’s move to address issues within its solar industry and the recent $1.7bn loan guarantee from the US government to hydrogen developer Plug Power has buoyed the sector in recent weeks.

It comes as the theme has struggled in recent years, while issues around oversupply and interest sensitivity have magnified the issue. The sector was one of the worst performing in 2023.

Among the top performers was the Fidelity Clean Energy UCITS ETF (FNRG), bringing in returns of 15.6% over the last month, contrasting returns of -21.7% in 2023.

FNRG’s top three holdings are Vestas Wind Systems A/S (4.4%), First Solar 4.4% and Verbund AG (3.7%).

The Global X Hydrogen UCITS ETF (HYGG) also staged a comeback, returning 28.9% over the last month compared to -40% across 2023.

The top weighting includes US hydrogen producer Bloom Energy (15%), followed by Nel ASA (12.2%) and Plug Power (11%).

Following HYGG, the VanEck Hydrogen Economy UCITS ETF (HDGB) returned 18.4% over the last month.

Sentiment surrounding clean energy ETFs may also be on the recovery as interest rates begin to soften after aggressive hikes in 2023 and the financing of clean energy projects further accelerates in the US.

For example, Orsted received an investment of $680m from JP Morgan for solar and solar storage assets last month, made possible under Biden’s Inflation Reduction Act which launched in 2022.

Bullishness surrounding AI also aided returns, given the technology’s heavy consumption of electricity.

For example, recent research from Goldman Sachs found that a ChatGPT query needs nearly 10 times as much electricity to process as a Google search, with the same report estimating data centre power demand will grow 160% by 2030.

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