An ETF to capitalize on the clean energy transition
AAs we look at the investment case for energy markets, exchange-traded fund investors can also look to renewables to take advantage of the global push toward energy source diversification.
During the recent webcast, Capitalize on the clean energy transition, managing directors, portfolio managers and senior research analysts at Duff & Phelps Investment Management Co. Benjamin Bielawski, Eric Fogarty and Rodney Clayton discussed the war in Ukraine, which has accelerated tensions in energy markets, and the significant rise in energy prices which will be with us for some time. In addition to impacting traditional oil and gas markets, the current energy crisis has shone a spotlight on companies turning to cleaner, more sustainable technologies.
The current energy crisis can be attributed to supply-side impediments, including low inventory levels that have contributed to price volatility. For example, US natural gas inventories are 15% short of the five-year average. In addition, compared to levels a year ago, inventories are down 18%.
Meanwhile, as stocks dwindled, demand outstripped supply, especially in the expanding post-pandemic global economy, with many countries reopening.
Therefore, due to the combination of supply and demand factors, we have witnessed a spike in energy prices. For example, WTI crude oil prices are up 52% so far this year, while natural gas prices have jumped 118%.
Rising prices in traditional energy markets are also seen as a factor pushing more economies to adopt alternative energy sources, lest they be hampered by high energy prices. So far, 76 parties, representing 83 countries and 74.2% of global GHG emissions, have communicated a net zero goal. These countries have either enacted net zero goals as laws, enshrined net zero goals in policy documents, or only committed to net zero goals.
Looking ahead, Duff & Phelps projected private sector renewable energy demand to more than double by 2030. Considering current on-site generation, certificate purchases, solar and wind Offsite, strategists have warned that there is a significant gap between overall electricity demand in the coming years versus demand for renewable energy. Therefore, there is plenty of room for the growth of renewables to fill this shortfall.
In order to seize this growth opportunity, investors can turn to something like the Virtus Duff & Phelps Clean Energy ETF (NYSE:VCLN), the first ETF strategy managed by Duff & Phelps. The ETF seeks attractive total returns by investing globally in a portfolio of clean, renewable and sustainable companies and technologies that will meet future energy needs. Actively managed, VCLN focuses on well-positioned market leaders at the forefront of clean energy innovation and commercialization.
Duff & Phelps Investment Management pursues specialist investment strategies with an exceptional depth of resources and expertise. From its beginnings providing research and analysis of income-producing securities to Depression-era investors, the firm’s attention has been focused on identifying attractive opportunities through active management and fundamental research while managing the associated risks. Today, building on a distinguished heritage, Duff & Phelps has earned a reputation as a leader in investing in global listed infrastructure, global listed real estate, clean energy and diversified real estate assets.
VCLN’s investment process contrasts favorably with the less defined investment processes of passive clean energy indices, which are often driven by market capitalization and clean energy exposure scores derived from static criteria, sometimes opaque. In contrast, Duff & Phelps’ active investment management approach is more comprehensive than that of its passive competitors, resulting in a high-conviction equity portfolio with a more balanced risk profile.
Financial advisors interested in learning more about the clean energy transition can register for the Thursday, June 9 webcast here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.