BlackRock has introduced a new thematic equity ETF in the US providing global exposure to companies involved with energy storage technologies.
Energy storage is expected to be the leading technology for energy transition investments within three years.
The iShares Energy Storage & Materials ETF (IBAT US) has been listed on Nasdaq with an expense ratio of 0.47%.
The surge in demand for energy storage solutions reflects a long-term, growth-oriented megatrend. Recent industry data from Reuters Events indicates that within the next three years, energy storage is expected to outpace solar as the leading technology for energy transition investments.
This shift is being driven by several factors, including the pivotal role of alternative energy in advancing towards a low-carbon economy, the expanding electric vehicles market, and the increasing emphasis on energy security amid geopolitical uncertainties.
Methodology
The ETF gains exposure to the energy storage theme by tracking the STOXX Global Energy Storage and Materials Index. The index is constructed from an initial universe of developed and emerging market stocks with market capitalizations above $200 million and average daily traded values greater than $1m.
Firms that are non-compliant with international norms related to the environment and employment practices, are embroiled in severe ESG-related controversies, or are involved in controversial and conventional weapons, oil & gas, thermal coal, nuclear power, and tobacco are excluded from the selection pool.
Index provider STOXX employs FactSet’s Revere Business Industry Classification System (RBICS) to pinpoint companies aligned with the energy storage theme. This entails screening for firms with a minimum of 25% revenue exposure to pertinent sectors, including energy storage systems, stationary and heavy-duty batteries, hydrogen fuel, and fuel cells.
Additionally, the methodology utilizes EconSight’s patent database to identify innovators in relevant technologies. Specifically, it seeks firms with ‘high-quality’ patents, gauged by the number of citations (an indicator of technological relevance) and market coverage, as well as those with ‘patent specialization’, determined by the ratio of patents associated with eligible technologies to the firm’s total patents.
Constituents meeting these criteria are selected for the index and weighted by float-adjusted market capitalization, with capping rules varying from 4% to 8% based on factors such as revenue exposure, patent quality, and patent specialization.
The index is reviewed annually and rebalanced semi-annually.