Legal & General Investment Management has rolled out an ETF providing exposure to companies operating in the clean energy ecosystem.
LGIM has expanded its thematic product offering with the launch of a clean energy ETF.
The L&G Clean Energy UCITS ETF invests in companies that are adjudged to be at the forefront of global efforts to increase the provision of affordable sustainable energy, as encapsulated by the United Nations’ Sustainable Development Goal number seven.
The fund, which has listed on multiple exchanges in Europe, expands LGIM’s thematic product offering while also complementing its existing clean-themed ETF, the L&G Clean Water UCITS ETF.
Index strategy
The underlying Solactive Clean Energy Index utilizes a proprietary dataset on the global power industry provided by London-based data vendor GlobalData to construct a portfolio of pure-play companies operating in the wind, solar, marine power, hydro, biopower, and geothermal industries.
The index includes companies come from across the entire clean energy value chain, from equipment suppliers to service providers and end producers. To be eligible for inclusion, a company must be listed on a developed-market exchange and have a free-float market capitalization of at least $200 million ($150m for existing constituents) and a three-month average daily traded value of at least $1m.
The index excludes certain companies that derive substantial revenues from coal mining, or are involved in the production of controversial weapons, or have been classified as being in breach of at least one of the UN Global Compact principles for a continuous period of three years.
All constituents of the index are equally weighted subject to certain liquidity-based weight caps to ensure that securities with lower liquidity are not overly represented in the index. It currently comprises 45 constituents and is well-diversified at the country level with companies from the United States contributing 27.2%, Japan 16.2%, Canada 8.9%, and Germany 7.4%.
Climate consensus
Commenting on the launch, Howie Li, Head of ETFs at LGIM, said: “A global consensus on climate change has taken shape in just a few years, as wildfires have devastated entire regions, millions have taken to the streets to demand action, and COVID-19 has underscored the importance of averting looming threats before it is too late.
“In this context, we believe the market for clean energy is poised for secular long-term growth. We are delighted to have created this product to offer investors cost-effective exposure to a unique and diverse basket of stocks that are integral to the world’s growing embrace of cleaner energy.”
James Crossley, Head of UK Retail Sales at LGIM, added: “Climate change has become a key topic for our UK clients who are asking us to invest in products that have the lowest possible carbon footprint. By bringing our clean energy ETF to market, we are able to meet this demand and bolster LGIM’s leading ESG product offering. This will give investors access to those companies at the forefront of developments within the renewable energy sector, which is key to the energy transition needed to meet the Paris Climate Change agreement targets of net-zero carbon emissions by 2050.”
The fund is available on the London Stock Exchange in USD (RENW LN) and GBP (RENG LN), on Deutsche Boerse (RENW GY) and Borsa Italiana (RENW IM) in EUR, and on SIX Swiss Exchange (RENW SW) in CHF.
It comes with a total expense ratio of 0.49%.