ETF Securities Australia has launched a new thematic equity ETF which is the country’s first to target companies involved in the global hydrogen industry. Hydrogen-based power is predicted to play a major role in achieving global net-zero carbon emissions.
The ETFS Hydrogen ETF (HGEN AU) has been listed on the Australian Securities Exchange with an expense ratio of 0.69%.
Hydrogen-based power is predicted to play a major role in achieving global net-zero carbon emissions by providing a more accessible, efficient, and sustainable energy solution.
Applications for hydrogen fuel continue to be developed from power generation and grid balancing to industrial fuel, feedstock for industry, transportation fuel, heating, aerospace, and shipping.
The falling cost of renewable energy and electrolyzers has opened the door for large-scale hydrogen production and commercial viability. Furthermore, the challenge of safe and effective storage for hydrogen has largely been met due to recent technological advances.
The growth of the hydrogen industry is expected to be reinforced by government policies and incentives as the world shifts away from fossil fuel energy. Biden’s election to US President has further propelled the green agenda to the fore with the US and EU both pledging to be climate-neutral by 2050, while China and Japan are also actively supporting hydrogen research.
The fund taps into the hydrogen growth story by tracking the Solactive Global Hydrogen ESG Index.
The index selects its constituents from a universe of developed market stocks, including listings in South Korea and Taiwan, with market capitalizations greater than $100 million and average daily trading volumes above $1m.
Security selection is driven by ARTIS, Solactive’s proprietary natural language processing algorithm, which identifies firms linked to a specific theme by screening for related keywords in a company’s publicly available documents.
With reference to the hydrogen theme, ARTIS identifies companies with business operations linked to the production and supply of hydrogen fuel-cells and related equipment, the development of hydrogen fuelling stations and hydrogen-based infrastructure, and the storage, generation, and distribution of hydrogen that can be used as energy.
The 30 stocks with the highest thematic relevance scores are selected for inclusion. Companies classified to certain oil-related industries, violators of UN Global Compact principles, and firms with significant operations linked to disputed industries (such as weapons, gambling, thermal coal, and tobacco) will be removed and replaced with the next eligible constituent.
The index is weighted by market capitalization, while capping stocks classified as ‘pure-play’ at 10% and those classified as ‘non-pure-play’ at 4%. Reconstitution and rebalancing occur on a semi-annual basis.
Stocks from the US, the UK, and South Korea dominate the index with weights of 26.2%, 22.0%, and 17.6%, respectively. Canada is the next-largest country exposure at 9.7%.
Significant positions include Plug Power (9.1%), Ballard Power Systems (8.9%), ITM Power (8.0%), Bloom Energy (7.4%), and Doosan Fuel Cell (7.3%).
ETF Securities has notably expanded its thematic ETF capabilities this year – in August, the firm launched Australia’s first ETF providing exposure to companies from across the semiconductor value chain.