WisdomTree has expanded its range of thematic exchange-traded funds (ETFs) with the launch of the WisdomTree Energy Transition Metals and Rare Earths Miners UCITS ETF (RARE).
RARE tracks the price and yield performance of the WisdomTree Energy Transition Metals and Rare Earths Miners index, which has been designed to track the performance of listed companies in developed and emerging markets that are primarily involved in the exploration and processing of metals associated with energy transition themes. They also must meet WisdomTree’s ESG criteria.
The index is exposed to electric vehicles, transmission, charging, energy storage, solar, wind and hydrogen. Alongside this, the index has exposure to the energy transition value chain through companies involved in crucial metal categories including lithium, nickel, cobalt, copper, iridium, aluminium, zinc, tin, silver, platinum and rare earth elements and sub-sectors such as mining, refining or smelting.
Further, WisdomTree has partnered with Wood Mackenzie, an energy transition research and consulting firm, which will select stocks for the index. According to Wood Mackenzie’s 1.5 degree scenario, electrification and renewables are crucial to reduce carbon emissions. The 1.5 scenario requires an estimated $60trn (£47trn) of capital expenditure by 2050, as crucial metals and miners will drive the energy transition value chain.
Chris Gannatti, global head of research at WisdomTree, said: “A key outcome from COP28 was more policy support to pivot away from carbon intensive forms of energy, with leaders agreeing to triple renewable energy capacity by 2030. The transition to more renewable and sustainable energy sources could be the largest driver of metal demand over the coming decades.
“Metals like copper, nickel, aluminium, cobalt and lithium will need to see increased levels of extraction so that the technologies required to reach the climate targets set out in the Paris Agreement can be built. Wind turbines, for example, have traditionally relied on gearboxes, but direct drive turbines are becoming more popular offshore which is likely to reduce copper intensity but increase rare earth demand.
“Meanwhile, as solar photovoltaic manufacturers seek out efficiency gains, they are likely to increase their silver usage. With the supply shortages currently being experienced, companies involved in the energy transition metals value chain will need to play an integral role as the race to extract more crucial metals takes centre stage.”
The ETF has a total expense ratio (TER) of 0.50%.
