BlackRock has launched a new thematic ETF in Europe providing exposure to companies involved in the mining and processing of metals considered essential to energy transition technologies.
The ETF targets mining companies specializing in the extraction of metals considered essential to the energy transition.
The iShares Essential Metals Producers UCITS ETF has been listed on Deutsche Börse Xetra in euros (CEBT GY) and on Euronext Amsterdam in US dollars (METL NA).
The fund is aimed at investors interested in capitalizing on the enduring trend of a worldwide transition from fossil fuels to more environmentally sustainable energy alternatives.
Income is accumulated within the portfolio, thus making the ETF a suitable option for investors eyeing long-term capital growth.
The fund’s expense ratio is 0.55%.
Methodology
The ETF is linked to the S&P Global Essential Metals Producers Index which selects its constituents from a universe of developed and emerging market stocks of companies with market capitalizations above $300 million and average daily trading volumes greater than $3m.
Firms within the eligible universe are then evaluated based on ‘Exposure Scores’ which are calculated based on the percentage of revenue generated from the discovery, extraction, and processing of either ‘core’ or ‘non-core’ metals.
In this context, ‘core metals’ refer to those metals anticipated to experience robust demand primarily driven by the shift towards renewable energy technologies. These include elements like cobalt, copper, lithium, nickel, platinum, palladium, and rare earth metals.
On the other hand, ‘non-core metals’ such as aluminum, bauxite, molybdenum, silver, and zinc are utilized in renewable energy applications but are not expected to see their demand significantly influenced by this sectoral transition.
Companies generating a substantial part of their revenue from non-core metals will see a relative decrease in their Exposure Scores compared to those principally involved with core metals.
The index aims to include all companies that meet or exceed a specified Exposure Score threshold and strives for a roster consisting of at least 50 constituents. Once selected, these constituents are weighted based on a hybrid formula that takes into account both their float-adjusted market capitalization and their respective Exposure Scores.
Additionally, there are capping rules in place for individual stock weightings; firms that fall into the highest bracket of Exposure Scores are capped at an 8% portfolio weighting, whereas those at the lower end have a maximum cap of 4%.
As of 18 October, the index’s leading country exposures were Australia (20.9%), Canada (17.3%), the US (15.4%), the UK (8.9%), China (8.6%), and South Africa (6.0%).