BlackRock targets electric vehicle value chain with new thematic ETF

Feb 26th, 2019 | By | Category: ETF and Index News

BlackRock has launched a new thematic equity ETF in Europe, offering access to companies that are poised to benefit from the global shift towards electric vehicles.

BlackRock electric vehicles thematic etfs

The fund provides exposure to firms across the entire electric vehicle value chain including manufacturers, battery suppliers, and component producers.

The iShares Electric Vehicles and Driving Technology UCITS ETF (ECAR LN) has been listed on the London Stock Exchange in US dollars and cross-listed on Xetra in euros (Ticker: IEVD GY).

The fund is linked to the STOXX Global Electric Vehicles & Driving Technology Index which provides exposure to firms across the electric vehicle value chain including manufacturers, battery suppliers, and component producers.

Rob Powell, Lead Strategist, iShares Thematic Investing at BlackRock, commented, “We are on the cusp of another huge leap in the way we get from A to B as the irreversible trend towards electric vehicles unfolds. And beyond the vehicle manufacturers, producers of battery technology, autonomous vehicle components, and charging infrastructure will all benefit from this revolution in transportation.

“Thematic investments, such as ECAR, can help investors seek long-term growth while expressing a view on the innovative companies that will shape the global economic future.”

The index draws its constituents from the parent STOXX Global Total Market Index, a broad global index consisting of both developed and emerging market stocks. Firstly, companies with market capitalizations less than €200 million or three-month daily traded volumes less than €1m are removed from the selection pool.

The methodology then uses the FactSet Revere Business Industry Classification System to assign stocks to three sub-sectors related to the electric vehicles theme: electric vehicle manufacturers, electric vehicle battery suppliers, and electric vehicle manufacturers’ supply chain. Generally, companies must derive more than 50% of their revenue from the above sub-sectors to be eligible for inclusion.

There are currently 96 constituents within the index which were equally weighted as of the index’s last annual review date in June 2018.

Around two-thirds of the index weight is allocated to firms listed in just three countries: Japan (30.6%), the US (25.5%), and South Korea (10.7%). The next largest country exposures are India (7.6%) and Germany (7.4%).

The index contains a strong leaning towards consumer discretionary stocks which account for 69.5% of the total weight, while the information technology sector also plays a significant role with a weight of 21.4%.

The fund comes with a total expense ratio (TER) of 0.40%.

There are currently around 1.1 million electric vehicles sold every year; however, this figure is expected to rise to 60 million by 2040, according to BlackRock and Bloomberg New Energy Finance.

And while the estimates above highlight the growth potential of the electric vehicle theme, BlackRock also notes the ETF is well-suited for investors looking to incorporate environmental, social, and governance (ESG) values into their portfolio.

BlackRock points to research from the International Energy Agency that shows that around a quarter of CO2 emissions globally are linked to the transport sector. By investing in the ETF, investors will be helping to drive the trends that are moving the world towards a low-carbon economy.

The fund follows swiftly on the heels of the Xtrackers Future Mobility UCITS ETF (XMOV GY) which launched on Xetra earlier this month. This fund tracks the Nasdaq Global Yewno Future Mobility Index which uses artificial intelligence processing to select firms closely related to the sub-themes of autonomous vehicles, electric and hybrid vehicles, and electric and lithium batteries. The fund’s TER is 0.35%.

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