ETFs
Clean energy ETFs rebound against China and the United States
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Clean energy ETFs were the best performers in May after major developments in China and the United States boosted the sector.
China’s move to address problems in its solar industry and the U.S. government’s recent $1.7 billion loan guarantee to hydrogen developer Plug Power have boosted the sector in recent weeks.
This increase comes as the theme has experienced difficulties in recent years. Challenges related to oversupply and interest rate sensitivity have amplified the problem. The sector was among the the least efficient in 2023.
Among the best performers was the Fidelity Clean Energy UCITS ETF (FNRG)generating returns of 15.6% over the past month and 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) has also rebounded, returning 28.9% over the past month, compared to -40% for all of 2023.
The largest weighting includes US hydrogen producer Bloom Energy (15%), followed by Nel ASA (12.2%) and Plug Power (11%).
Following HYGG, the ETF VanEck Hydrogen Economy UCITS (HDGB) has returned 18.4% over the past month.
Is sentiment on clean energy improving?
Sentiment surrounding clean energy ETFs could also pick up as interest rates begin to fall after aggressive hikes in 2023 and financing of clean energy projects accelerates in the United States.
For example, Orsted last month received a $680 million investment from JPMorgan for solar and solar storage assets, made possible under President Joe Biden’s Inflation Reduction Act, launching in 2022.
Optimism surrounding AI also helped returns, given the technology’s high electricity consumption.
For example, a recent Goldman Sachs study found that a ChatGPT query requires nearly 10 times more electricity to process than a Google search, with the same report estimating that data center energy demand will increase by 160 % by 2030.
This story first appeared in ETF.com’s sister publication, ETFStream.com.
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