Transition metals ETFs launched

Two exchange traded funds that provide exposure to 'transition' or 'green' metals, or those that will be essential in the transition to a more electric economy, launched on the same day on the Australian Stock Exchange.

Betashares launched the BetaShares Energy Transition ETF (XMET) which provides investors exposure to a portfolio of global companies in the energy transition metal industry. It tracks the Nasdaq Sprott Energy Transition Materials Select Index. That index also has an environmental, social and governance (ESG) screen which means companies in it cannot exhibit non-compliance of the United Nations Global Compact, cannot have a controversy level higher than four on the Sustainalytics scale and cannot have business activity involvement of certain degrees in alcoholic beverages (5% revenue threshold), gambling (5% revenue threshold), oil & gas (10% revenue threshold), oil sands extraction (5% revenue threshold), thermal coal (10% revenue threshold) or tobacco products (5% revenue threshold).

Meanwhile, Global X launched the Green Metal Miners ETF, which tracks the BITA Global Green Energy Metals Index. That index also tracks companies that are involved in the extraction, processing, and physical trading of metals considered by the International Energy Agency IEA to be critical for the transition towards a clean energy future. Stocks also need to exhibit above-average performance in the management of a series of environmental issues within their sector.

Both ETFs have identified what will be an ongoing need for certain kinds of metals in the "electrification of everything". In fact, in a research paper Global X product and research specialist, David Tuckwell, highlights how a study published by the International Energy Agency in 2021 found that if the Paris Agreements were to be met, then demand from clean energy technology for these metals would quadruple by 2040.