Horizon Kinetics has introduced a new actively managed global equity ETF providing thematic exposure to traditional energy companies as well as firms developing remediation technologies that reduce the environmental impact of carbon-based energy production.
The ETF’s investment strategy acknowledges that fossil fuels will remain essential to supplying the world’s energy needs for many years.
The Horizon Kinetics Energy & Remediation ETF (NVIR US) has been listed on NYSE Arca with an expense ratio of 0.85%.
According to Horizon Kinetics, the ETF’s dual mandate is “reality-based”, acknowledging the world’s existing and growing demand for carbon-based energy as well as the long-term nature of the shift to cleaner energy sources.
The firm notes that, until new power sources and technological solutions come to fruition at scale, fossil fuels remain essential to supplying the world’s energy needs; however, remediation technologies can play an important role in the meantime in helping to limit the negative environmental impact.
The ETF divides its exposure between two distinct sectors. The first comprises fossil fuel producers with an emphasis on royalty companies that own the land on which the exploration and production companies operate. Horizons Kinetics notes that royalty companies act as toll roads, collecting fees for any activity on their land such as drilling wells, pipelines, and access roads. These firms typically come with very little operating, balance sheet, or regulatory risk.
The second sector consists of companies that provide environmentally constructive solutions to the first group. These include firms involved in water recycling, oil rig electrification, flare gas capture, solar or wind-powered drilling, and carbon sequestration projects, among others.
Commenting on the ETF’s investment strategy, Fredrik Tjernstrom, Portfolio Manager at Horizon Kinetics, said: “Particularly given the events of the last year, the investment philosophy of the fund should resonate with a broad range of investors. Today, it is more readily observable that the world, in terms of energy, faces structural supply and demand challenges that are not easily or rapidly fixed. There is still a disconnect between the pure geological and engineering realities of the energy transition and perception. The world simply cannot quit fossil fuels cold. The ETF will try to separate ‘spin’ from factual analysis, between what people think is going on and what is actually going on. Ultimately, the laws of physics can’t be denied. That’s a great obstacle to the process of phasing out, or at least meaningfully reducing dependence upon fossil fuels.”