Clean Energy ETFs Rebound on China, U.S. Windfall
Clean energy ETFs led gainers in May after major developments in both China and the U.S. boosted the sector.
China’s move to address issues within its solar industry and the recent $1.7 billion loan guarantee from the U.S. government to hydrogen developer Plug Power has buoyed the sector in recent weeks.
The surge comes as the theme has struggled in recent years. Challenges around oversupply and interest sensitivity have magnified the issue. The sector was among the worst performing in 2023.
Among the top performers was the Fidelity Clean Energy UCITS ETF (FNRG), generating returns of 15.6% over the last month and contrasting returns of -21.7% in 2023.
FNRG’s top three holdings are Vestas Wind Systems A/S (4.4%), First Solar 4.4% and Verbund AG (3.7%).
The Global X Hydrogen UCITS ETF (HYGG) also rebounded, returning 28.9% over the last month compared to -40% across 2023.
The top weighting includes U.S. hydrogen producer Bloom Energy (15%), followed by Nel ASA (12.2%) and Plug Power (11%).
Following HYGG, the VanEck Hydrogen Economy UCITS ETF (HDGB) returned 18.4% over the last month.
Clean Energy Sentiment Improving?
Sentiment surrounding clean energy ETFs may also be rallying as interest rates begin to soften after aggressive hikes in 2023 and the financing of clean energy projects accelerates in the U.S.
For example, Orsted received an investment of $680 million from JPMorgan for solar and solar storage assets last month, made possible under President Joe Biden’s Inflation Reduction Act, which launched in 2022.
Bullishness surrounding AI also aided returns, given the technology’s heavy consumption of electricity.
For example, recent research from Goldman Sachs found that a ChatGPT query needs nearly 10 times as much electricity to process as a Google search, with the same report estimating data center power demand will grow 160% by 2030.
This story first appeared in etf.com's sister publication, ETFStream.com.