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Clean Energy – A Global Paradigm Shift is Underway

March 05, 2021

Read Time 4 MIN

 

Regulatory support to transition the world to a cleaner energy mix and reduce the global carbon footprint along with falling costs of clean technology are setting the stage for a clean energy revolution.

Policy and Pricing See Change

The regime change in the United States has brought the climate debate front and center with President Biden making regulatory changes in earnest. Within his first 30 days, President Biden has taken action to rejoin the Paris climate accord, revoke the permit for Keystone XL pipeline and committed to an aggressive carbon reduction policy in the United States. On the other side of the pond, U.K. Prime Minister, Boris Johnson has committed his country to the deepest greenhouse gas cuts in the G-20 with a goal to reduce greenhouse gas emissions 68% by 2030. Chinese President Xi Jinping has also acted, pledging to reach net-zero carbon emissions by 2060.

The U.K.’s Climate Change Committee estimates the costs of renewable energy technologies will continue to fall over the next three decades and some budding technologies will see steep price reductions. Offshore wind costs have fallen 60 percent1 over the past five years alone, while the price of solar photovoltaic (PV) panels has fallen by 83% since 2010.Looking ahead, costs of producing Hydrogen could half and costs of electric vehicle batteries may fall by almost 65% by 2050.3

Clean Cost Cuts

Clean energy costs are expected to fall over the next three decades.

Clean Cost Cuts

Source: Bloomberg and Climate Change Committee
Costs measured in units of per megawatt hour

Growing and Emerging Clean Energy Themes

Several long-existing clean energy themes as well as emergent themes have taken center stage following significant growth and share price appreciation in 2020.

Wind

In 2019, five percent of the global electricity came from Wind.Wind power is currently America’s largest source of renewable energy and continues to grow as traditional utilities diversify their energy mix.Turbine manufacturers that build the generators, towers and blades to harvest wind dominate this theme. Vestas Wind Sytems, Seimens and General Electric are some of the larger companies invested in wind.

Solar

The solar industry mainly consists of 1) manufactures that produce photovoltaic panels 2) installers that install these devices at residential and commercial facilities 3) Utilities that have high solar power generation presence. First Solar Inc., Jinkosolar Holding Co., Solar Edge Technologies, Sunrun Inc. are some of the major players in the solar industry.

Electric Vehicles and Battery Technology

Electric vehicles (EVs) are battery-powered vehicles that do not rely on internal combustion engines powered by fossil fuels. This industry is seen as a low hanging fruit to curb carbon emissions. The electric vehicle infrastructure primarily consists of automobile, battery and inverter manufacturers. Electric vehicle charging stations and wiring companies are also emerging technologies in this theme.

Hydrogen and Fuel Cell

Hydrogen is the simplest energy dense element that if burned for fuel only, produces water as its byproduct. A fuel cell combines hydrogen and oxygen to produce energy. The challenge has been in producing hydrogen fuel cells at a scale. Falling costs of production along with government and corporate interest alike is supportive of this nascent technology. Bloom Energy, Plug Power, Ballard Power Systems and FuelCell Energy are some of the promising companies investing in this sector.

Filtration

Filtration includes products that reduce carbon emissions in industrial and consumer applications, such as innovative building insulation. The concern to curb carbon emissions has brought prominence to companies manufacturing these products. Johnson Matthey PLC, NIBE Industrier AB, Horiba Ltd and Kingspan Group PLC are some of the leading companies in this segment.

VanEck Vectors Low Carbon Energy ETF (SMOG) allows investors to access these clean energy themes, from companies involved in renewable energy production and distribution to companies that provide key technologies to the entire supply change.

SMOG Exposure

SMOG Exposure

The current global policy provides support to aid the transition towards a cleaner future and will require commitment of capital and intensive investment in clean energy infrastructure. The policy momentum coupled with the falling costs of clean technology is setting the stage for growth potential for companies participating across the entire clean energy ecosystem.

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Important Disclosures:

https://www.ft.com/content/33bb3714-93cf-4af5-9897-e5bf3b013cb7

https://www.theccc.org.uk/wp-content/uploads/2019/05/Advisory-Group-on-Costs-and-Benefits-of-Net-Zero.pdf

https://www.bloomberg.com/news/articles/2020-12-09/green-energy-boom-may-pay-for-itself-says-u-k-climate-adviser?sref=wyMYZNQq

https://ourworldindata.org/renewable-energy#installed-wind-capacity

https://cleanpower.org/facts/wind-power/

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

An investment in the Fund may be subject to risks which include, among others, investing in low carbon energy companies, investing in European issuers, foreign securities, foreign currency, depository receipts, industrials sector, information technology sector, utilities sector, small- and medium-capitalization companies, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's return. Small- and medium-capitalization companies may be subject to elevated risks.

ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by VanEck or any judgment exercised by VanEck will reflect the opinions of any particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and VanEck is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.

ESG integration is the practice of incorporating material environmental, social and governance (ESG) information or insights alongside traditional measures into the investment decision process to improve long term financial outcomes of portfolios. Unless otherwise stated within the Fund’s investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective, but rather describes how ESG information is integrated into the overall investment process.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus , which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs . Please read the prospectus and summary prospectus carefully before investing.

Important Disclosures:

https://www.ft.com/content/33bb3714-93cf-4af5-9897-e5bf3b013cb7

https://www.theccc.org.uk/wp-content/uploads/2019/05/Advisory-Group-on-Costs-and-Benefits-of-Net-Zero.pdf

https://www.bloomberg.com/news/articles/2020-12-09/green-energy-boom-may-pay-for-itself-says-u-k-climate-adviser?sref=wyMYZNQq

https://ourworldindata.org/renewable-energy#installed-wind-capacity

https://cleanpower.org/facts/wind-power/

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

An investment in the Fund may be subject to risks which include, among others, investing in low carbon energy companies, investing in European issuers, foreign securities, foreign currency, depository receipts, industrials sector, information technology sector, utilities sector, small- and medium-capitalization companies, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified and concentration risks, all of which may adversely affect the Fund. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's return. Small- and medium-capitalization companies may be subject to elevated risks.

ESG investing is qualitative and subjective by nature, and there is no guarantee that the factors utilized by VanEck or any judgment exercised by VanEck will reflect the opinions of any particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may not be accurate or complete, and VanEck is dependent on such information to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.

ESG integration is the practice of incorporating material environmental, social and governance (ESG) information or insights alongside traditional measures into the investment decision process to improve long term financial outcomes of portfolios. Unless otherwise stated within the Fund’s investment objective, inclusion of this statement does not imply that the Fund has an ESG-aligned investment objective, but rather describes how ESG information is integrated into the overall investment process.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus , which contains this and other information, call 800.826.2333 or visit vaneck.com/etfs . Please read the prospectus and summary prospectus carefully before investing.