VanEck has launched a new ETF in the US targeting companies that mine and process so-called ‘green metals’.
‘Green’ metals are considered essential to the clean energy revolution.
The VanEck Green Metals ETF (GMET US) has been listed on NYSE Arca with an expense ratio of 0.59%.
Distributions are made on an annual basis.
Green metals are defined as metals and other minerals that are essential inputs to technologies enabling the transition from fossil fuels to a low-carbon, clean energy world.
Clean energy technologies tend to require a wide variety of metals. For example, compared to conventional cars, electric vehicles also call for significant amounts of lithium, nickel, manganese, cobalt, graphite, and rare earths.
Onshore and offshore wind energy systems, meanwhile, need zinc, molybdenum, and neodymium, amongst other metals.
VanEck believes the investment case for green metals is robust as government-mandated policies, combined with changing consumer habits in favour of clean products and technologies, will lead to increased demand for these metals as inputs.
Additionally, significant deficits in supply (relative to demand), long project lead times, and declining resource quality also have the potential to drive metal prices higher.
Methodology
The fund tracks the MVIS Global Clean-Tech Metals Index which selects its constituents from a universe of developed and emerging market stocks, including Chinese A-shares available for Northbound trading under the Stock Connect link, with market capitalizations above $150 million and average daily trading volumes greater than $1m.
The methodology first builds an eligible universe by screening for companies that derive at least 50% of their revenue from producing, refining, processing, or recycling green metals. Firms with the potential to generate more than half of their revenue from these activities once current projects are fully developed are also included.
The full list of green metals and minerals are cerium, cobalt, columbium, copper, dysprosium, erbium, europium, holmium, indium, iridium, lanthanum, lithium, lutetium, manganese, molybdenum, natural graphite, neodymium, nickel, niobium, osmium, palladium, platinum, praseodymium, rhenium, rhodium, ruthenium, samarium, scandium, terbium, thulium, tin, vanadium, ytterbium, yttrium, zinc, zircon, and zirconium.
The index then selects the largest companies while targeting 90% of the eligible universe’s total market capitalization and ensuring that a minimum of 25 companies are included.
Constituents are weighted by float-adjusted market capitalization subject to an individual cap of 8%. The index is reviewed on a quarterly basis.
As of 10 November, the index contained 44 constituents with Chinese stocks accounting for a third (32.7%) of the total weight and the next-largest country exposures being Australia (15.6%), the US (11.3%), South Africa (6.3%), and Russia (6.1%). All stocks included in the index were classified to the materials sector.
Notable positions included Freeport-Mcmoran (9.3%), Glencore (8.4%), Ganfeng Lithium (6.6%), Norilsk Nickel (6.1%), Zhejiang Huayou Cobalt (6.0%), China Northern Rare Earth (5.1%), Grupo Mexico (4.4%), and Teck Resources (4.2%).
VanEck offers a further three mining ETFs in the US. The $14.5bn VanEck Gold Miners ETF (GDX US) and $5.0bn VanEck Junior Gold Miners ETF (GDXJ US) target large-cap and small-cap firms, respectively, within the global gold mining industry, while the $1.1bn VanEck Rare Earth/Strategic Metals ETF (REMX US) offers exposure to mining, refining, and recycling companies focused on rare earth and strategic metals and minerals.