Global X’s Green Metals Miners ETF launched: Here’s what you need to know
The new fund will allow Australian investors to gain exposure to the picks and shovels behind the clean energy transition.
Climate-conscious investors will gain access to a fresh investment avenue with the launch of the Global X Green Metals Miners ETF (ASX: GMTL) on the ASX on Wednesday.
GMTL will provide exposure to international companies producing critical metals for clean energy infrastructure and technologies, including lithium, copper, nickel, rare earths and cobalt.
The exchange-traded fund (ETF) tracks the BITA Global Green Energy Metals Index and will include companies that earn more than 50% of their revenue from mining or producing green metals. It will include an ESG screen to exclude businesses that do not meet reasonable industry standards.
"Demand for green metals is soaring around the globe and promises to intensify as climate change initiatives become more ambitious," Global X head of investment strategy Blair Hannon said.
"The investment opportunity lies in the market dislocation of critical minerals over the medium to longer term – with demand set to outpace supply and spark higher commodity prices."
The launch adds to the bulging ETF portfolio of Global X (formerly known as ETF Securities Australia), which is part of international investment manager Mirae Asset Financial.
The investment case for green
The new fund is focused on the growing investment opportunity in the mining industry as the world embraces clean energy.
Green metals, which are minerals used extensively in the production, transmission and storage of renewable energy, will be instrumental in worldwide efforts to fight global warming as governments and companies alike strive to reach net-zero carbon emissions by 2050.
Building clean energy technology – such as electric cars, offshore wind turbines and solar farms – requires far more metal than fossil fuel alternatives.
If all climate pledges are honoured, demand for clean energy technologies backed by green metals could quadruple by 2040, according to the International Energy Agency. Revenue from green metal mining and production is set to outpace coal well before 2040.
However, as demand increases, supply of green metals will contract – effectively driving up commodity prices. Some metals, such as lithium, are forecast to be in deficits for years.
Global X is betting that given the sheer scale of demand for these metals in coming years and the relative lack of supply, miners of energy transition metals will likely trade on higher valuations for the foreseeable future. The growth of ESG mandates, which have put pressure on traditional fossil fuel companies, will support these premiums.
What do you actually own?
The Global X Green Metals Miners ETF will provide medium-term to long-term exposure to targeted commodities with increasing demand for the transition to renewable and clean energy technologies.
It includes companies which make more than 50% of their revenue mining or producing green metals and will track the BITA Global Green Energy Metals Index. ESG screening will work to further restrict fossil fuel companies which rate poorly.
Like its benchmark, the fund has an individual stock cap of 7% to prevent large companies from weighting the index too heavily. Allocations are also capped to a maximum of 10 stocks per mineral group to ensure diversification.
Its top 10 holdings include lithium miners Albermarie Corp (NYSE: ALB) and Australia's Pilbara Minerals (ASX: PLS), Norsk Hydro (OTCMKTS: NHYDY) and Chinese firms Ganfeng Lithium Group (SHE: 002460) and Zhejiang Huayou Cobalt (SHA: 603799).
The GMTL ETF has an annual management fee of 0.69%.
Pros and cons of this ETF
- Supports clean energy transition initiatives backed by governments and companies.
- Provides diversified exposure to the materials sector.
- Strong growth potential based on surging demand and impending supply crunches for green metals.
- ETF trading volume is generally low, so investors may not have adequate liquidity.
- Potentially less diversification as this ETF is concentrating on a particular part of the resources sector.
- Higher risk because the fund comprises mostly of growth assets which tend to exhibit higher levels of price volatility.
Looking for a low-cost online broker to invest in the stock market? Compare share trading platforms to start investing in stocks and ETFs.