ALPS ETF Trust has launched the ALPS Clean Energy ETF (ACES US) on Cboe BZX Exchange. The passively managed fund tracks a portfolio of North American stocks from firms operating in the clean energy sector, including renewables and clean tech.
ACES is the first ETF to offer pure-play exposure to the clean energy theme within the North American equity universe.
ACES tracks the CIBC Atlas Clean Energy Index, which includes companies that are listed in either the US or Canada and have a market cap over $100 million.
As of 22 June 2018, over half (54.5%) of the total index weight was dedicated to mid-cap stocks with most of the remaining exposure (39.7%) in small-caps. Large-cap firms account for just 5.8% of the index weight.
To be eligible for inclusion, a company must have been assigned to at least one of several ‘clean energy’ sub-industries.
The largest of these sub-industries is currently wind which accounts for a third of the total index weight. Other significant subindustries represented in the index include energy efficiency/LED/smart grid (18.7%), solar (15.0%), biomass/biofuel (13.6%), hydro/geothermal (10.0%), and electric vehicles/storage (5.8%).
Stocks are weighted by market cap with a limit of 5% per constituent. Reconstitution and rebalancing occurs on a quarterly schedule.
The fund currently has 31 constituents; the largest of these is Tesla (5.8%), Covantha (5.3%), Itron (5.3%), Pattern Energy (5.2%) and Ormat Technologies (5.2%).
Whilst there are few clean energy ETFs currently available, the ETF is the first to offer pure-play exposure to the theme within the North American equity universe only.
According to ALPS, the focus of the strategy may appeal to investors due to key trends that are emerging in the clean energy space within the US market.
The firm notes that the US is undergoing a significant long-term shift in the electricity and energy sector which is changing how energy is produced and consumed. Renewable energy, primarily wind and solar, now makes up more than 60% of the power sector capacity additions in the US. Renewables currently account for a smaller share of the total US power generation at approximately 18%; however, the share of investment suggests the shift in mix is poised to accelerate.
The US makes up 15-20% of global investment in clean energy annually, nearly $60bn in 2017, according to Bloomberg New Energy Finance. ALPS believes that, as energy users continue to shift towards a clean future, investment in this space will continue to expand further. Much of the dollar amount invested in the clean energy sector will show up in wind and solar investment, though ALPS notes there are still significant opportunities in the niche clean energy sectors as well.
ACES has an expense ratio of 0.65%. The fund pays dividends to investors according to a quarterly schedule. Its current dividend yield is 3.0%.