KraneShares has expanded its suite of ‘Climate Investment’ ETFs with a thematic commodities fund targeting key metals needed for the electrification of the global economy.

Certain metals are essential inputs to renewable energy infrastructure.

The KraneShares Electrification Metals ETF (KMET US) has been listed on NYSE Arca with an expense ratio of 0.79%.

The fund tracks the Bloomberg Electrification Metals Index which comprises futures contracts on copper (target weight of 25%), nickel (25%), aluminum (20%), zinc (15%), cobalt (10%), and lithium (5%). The commodities are rebalanced to their target weights on a quarterly basis.

The index rolls its futures contracts over a five-day period shortly before the expiration of those contracts, shifting the exposure to new contracts which expire two months later.

The fund’s underlying metals are essential components of electric vehicles, renewable energy infrastructures such as solar panels and wind turbines, transmission and distribution grids, and electrical wiring.

According to KraneShares, these metals are expected to experience strong demand over the coming decades as the world accelerates its decarbonization efforts. The firm notes that more than $140 trillion of investment is needed for the clean energy transition over the next thirty years, while the global battery market could see a nearly five-fold increase in demand between 2020 and 2025.

While there are dozens of equities-based investment products providing thematic exposure to the global decarbonization megatrend, a commodities-based approach is relatively unexplored. KraneShares’ newest ETF has been designed to fill that gap by offering exposure to transitional commodities which may act as a hedge against climate change, inflation, and supply-side disruptions. Climate-aligned investments may also serve to diversify portfolios by acting as differentiated and non-correlated sources of return that are not driven by the economic cycle.

Luke Oliver, Head of Strategy at KraneShares, said: “Transitional commodities are expected to experience a supply and demand imbalance over the next decade. These resources may be repriced depending on how they factor into the decarbonization of the global economy. We believe now is the time to invest in these electrification metals as demand is poised to accelerate into the energy transition.”

Jonathan Krane, CEO at KraneShares, added: “KMET is a timely expansion of the KraneShares Climate Investment suite which has quickly evolved from our flagship KraneShares Global Carbon Strategy ETF (KRBN US) to include regional carbon markets, energy transition equities, and now electrification metals. We believe investors should have direct access to the global decarbonization investment opportunity.”

The fund is not the first thematic commodities ETF to target the global decarbonization theme, however. The Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (EVMT US), which debuted in April, tracks metals widely used in the production of electric vehicles including nickel, copper, aluminum, cobalt, and iron ore. The fund’s expense ratio is 20 basis points cheaper at 0.59%.