Goldman joins clean energy rush
Goldman Sachs is launching another thematic ETF, this time targeting clean energy.
The Goldman Sachs Bloomberg Clean Energy Equity ETF (GCLN) tracks a Bloomberg index of global companies that make their money from renewable electricity or infrastructure that services it, like batteries and semiconductors.
The index is, in effect, actively managed by BNEF, the energy consulting arm of Bloomberg. BNEF’s researchers study energy companies to determine how much of their value is derived from clean energy. They look at things like revenue, future business plans, and alignment with clean energy regulations
Companies then go into tiers based on how much money they derive from clean energy. Those making most of their money from clean energy can take up to 60% of the fund and have higher stock caps. Companies making more than 10% but less than 50% of their revenue from renewables take the fund’s remaining 40%--with more weight given to those with greater clean energy revenue purity.
The fund currently holds 178 securities and charges a 0.45% fee.
Bernie’s commentary – big category, but politics…
Clean energy ETFs are at this stage a crowded and successful market. Adopting the narrow definition, which only includes wind, solar and pure clean energy utilities ETFs, there are currently 18 clean energy ETFs in the US, with more than $11 billion under management. If you broaden the definition to include things like battery tech and uranium then its a $20+ billion category. Not bad for a sector with margins that Vanguard can’t come along and ruin.
The reason there’s so much money in this niche owes to Biden election. After he won, Biden promised a green infrastructure package called Build Back Better (BBB). Money then flooded into clean energy ETFs.
But unfortunately investors got ahead of themselves. BBB was derailed by the West Virginian coal baron Joe Manchin. Since the derailing, clean energy ETFs have started underperforming and losing interest.
What all this means is that the real question for this ETF may not be financial but political.