LGIM Launches New ETF Targeting Energy Transition Commodities
European asset manager Legal & General Investment Management (LGIM), announced the launch of the L&G Energy Transition Commodities UCITS ETF, a new fund aimed at providing investors with exposure with commodities that are key to the energy transition.
Steven de Vries, Head of Wholesale UK, Europe and Latin America at LGIM, said:
“Demand for strategies that provide inflation risk mitigation and uncorrelated market exposure has been significant of late, not least due to the macroeconomic backdrop. Overlay this with the uniqueness of the proposition the Energy Transition ETF presents, and this becomes a particularly compelling strategy.”
According to LGIM, the new ETF provides access to a combination of commodities central to the energy transition, targeting three distinct commodity groups with supportive demand-side economics, including transition metals required for production, storage and distribution of clean energy; lower-carbon transition energy sources that can aid in addressing peak energy demand and hard-to-abate sectors, such as natural gas and ethanol, and; carbon pricing, that increases the cost of emissions and incentivizes the switch to lower-carbon activities.
LGIM also highlighted the diversification benefits of the new fund, with over 50% of the ETF’s constituents not typically found in traditional commodity portfolios, and with the fund providing access to 18 liquid commodities, including an allocation to carbon markets.
The fund is the latest in a series of energy transition-focused ETFs by LGIM, including the L&G Clean Energy UCITS ETF, L&G Battery Value-Chain UCITS ETF and L&G Hydrogen Economy UCITS ETF.
Aanand Venkatramanan, Head of ETFs, EMEA at LGIM said:
“Like the industrial revolution, the energy transition is a commodity story, but with a new cast of characters. Compared with today’s energy mix, we believe the energy transition is built on new inputs, which in our view are underrepresented in current commodity portfolios. This is why we built the ETF around transition metals, transition energy and carbon pricing; capturing the next phase of demand, and opportunity, in the story.”
The Fund, categorized as Article 6 under the EU’s SFDR regulation, will be available to both wholesale and institutional investors, registered in the UK, France, Germany, Italy, Netherlands, Norway, Denmark, Sweden, Finland, Austria, Luxembourg, Switzerland and Spain, as well institutional investors in Singapore.