- Clean energy indices can still have a high carbon intensity despite having ‘green’ objectives.
- HANetf provides innovative solutions for investors taking a holistic ESG approach.
- Initiatives such as HANzero™ ensure investment-related emissions are offset
September 2022, London
HANetf, Europe’s first independent white-label ETF and ETC platform, and leading provider of digital asset ETPs, wants to highlight the carbon intensity of clean energy indices and the solution for ESG-minded investors.
Investors are increasingly conscious of how climate change factors into their portfolios.[1] As a result, investors have allocated large amounts to the S&P Global Clean Energy Index.[2] This index is composed of global clean energy-related businesses from both developed and emerging markets. The growth in assets tracking this index saw it expand from its original 30 stocks to almost 100, by loosening its eligibility requirements.[3] The original 30 stock index is the S&P Global Clean Energy Select Index, is used by the HANetf S&P Global Clean Energy Select HANzero™ UCITS ETF (ZERO). [4]
It is undoubtedly positive for the planet that investors are allocating large amount of capital to an index of stocks that are leading the transition to a lower carbon economy. However, investors taking a holistic ESG approach are also concerned about the carbon footprint of their portfolio in the here and now. On this front, both clean energy indices are potentially troubling. [5]
According to figures for S&P Dow Jones Global Indexes, the S&P Global Clean Energy Index has a weighted average carbon intensity 341.05 (Metric tons CO2e/$1 million revenues).[6] The original 30 stock index (S&P Global Clean Energy Select, used by HANetf’s ZERO ETF) scores notably better with 266.53. [7]
However, that is still higher than most broad market indices. The S&P 500 has a weighted carbon intensity of 211.17, while S&P Global BMI’s stands at 257.42.[8] Even the materials, mining and fossil fuel heavy S&P United Kingdom BMI index has a lower carbon intensity than the two clean energy indices, sitting at 224.05. [9]
The greater carbon intensity of the clean indices makes sense. Factories producing solar panels use large amounts of electricity. This electricity is often still sourced from coal or gas power. Wind turbines also require a lot of steel and concrete. [10]
It is with this quandary in mind that HANetf released Europe’s first ETF with a carbon offset.[11] HANetf S&P Global Clean Energy Select HANzero™ UCITS ETF (ZERO) gives environmentally conscious investors the opportunity to gain access to the clean energy theme with the reassurance that any carbon emissions linked to their investment will be offset through HANzero™.[12] Any costs associated with the carbon offsetting are included in the fund’s fixed TER.
Tom Bailey, Head of ETF Research at HANetf comments:
“Electricity contributes around 25% to global greenhouse gas emissions.[13] Therefore, changing the way we produce energy is one of the world’s most pressing challenges. However, as positive as the energy transition will be, we can’t shy away from the less appealing aspects of it – notably, the high carbon intensity of producing the vital components of renewable energy. But rather than ignore or explain away this, we believe in confronting this head-on and working out solutions. Carbon offsets, we believe, achieve this – ZERO allows investors to invest in the energy transition will also neutralising the carbon footprint stemming from this.”
Source: HANetf Data as of 31.08.2022 / https://www.spglobal.com/ratings/en/
*Metric tons CO2e/$1 million revenues. Operational and first-tier supply chain greenhouse gas emissions. Source: S&P Dow Jones Indices www.spglobal.com
**Index for: HANetf S&P Global Clean Energy Select HANzero™ UCITS ETF (ZERO)
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