Global X rolls out wind and hydrogen ETFs in Europe

Global X has launched two new ETFs in Europe targeting the renewable energy investment themes of wind and hydrogen power.

The Global X Wind Energy UCITS ETF (WNDY) and Global X Hydrogen UCITS ETF (HYDR) have been listed on London Stock Exchange in US dollars and pound sterling as well as on Deutsche Börse Xetra in euros.

Each ETF comes with an expense ratio of 0.50%.

Renewable energy has climbed as a proportion of total global energy production over the past decade. According to the International Energy Agency, renewables’ share of electricity generation worldwide reached 29% in 2020, roughly 10% higher than at the end of 2010.

Growth has been propelled by decreasing costs, technological innovation, and supportive regulatory policies.

According to Global X, however, the renewable energy theme may still have plenty of room to run as growth will actually need to accelerate significantly in the coming decades to meet ambitious net-zero emissions targets and curb climate change.

Morgane Delledonne, Director of Research in Europe at Global X, said: “The transition to a clean energy future will require tens of trillions of dollars of investment in the coming decade. Renewable and clean energy sources like wind energy are continuing to gain market share on fossil fuel-based sources as related technologies become more affordable, and hydrogen will likely play a key role in decarbonizing hard-to-electrify sectors like transportation, buildings, and industry. Through the launch of these two UCITS ETFs, Global X is bringing targeted access to companies involved in advancements in wind energy and hydrogen.”

Wind

The Global X Wind Energy UCITS ETF tracks the Solactive Wind Energy v2 Index.

The index selects its constituents from an initial universe of developed and emerging market stocks with market capitalizations greater than $200 million and average daily trading volumes above $2m.

An initial ESG screen removes any company that is a proven UN Global Compact violator as well as firms deriving significant revenue from controversial industries including thermal coal and oil & gas.

Security selection is driven by Solactive’s proprietary natural language processing algorithm, called ARTIS, which identifies firms linked to a specific theme by screening publicly available information such as financial news, business profiles, and company publications for appropriate keywords.

With reference to the wind energy theme, the algorithm is programmed to identify companies with business operations linked to wind energy systems, wind power production, wind energy technology, and wind power integrations and maintenance.

Once ARTIS has created a list of potential constituents, the index selects the largest pure-play companies (those deriving at least 50% of their total revenue from wind energy business activities), up to a maximum of 50 stocks.

Should the above process result in the selection of fewer than 25 stocks, the methodology may also include pre-revenue wind energy companies in order to meet the minimum constituent count.

Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 12% and aggregate caps of 10% on all pre-revenue stocks, 15% on all Russia-listed stocks, and 45% on all stocks with weights above 4.5%.

The index is reconstituted and rebalanced semi-annually with buffer rules helping to limit unnecessary turnover.

Hydrogen

The Global X Hydrogen UCITS ETF, meanwhile, is linked to the Solactive Global Hydrogen v2 Index.

The index follows a similar approach, harnessing insights from ARTIS to identify companies globally with business operations linked to hydrogen production, the integration of hydrogen into energy systems, and the development of hydrogen fuel cells, electrolyzers, and other related technologies.

The methodology also selects the largest pure-play companies, up to a limit of 40, and may also include pre-revenue and diversified firms (entities deriving less than 50% of their revenue from hydrogen activities) to satisfy a minimum constituent count of 20.

Constituents are also weighted by float-adjusted market capitalization subject to a single stock cap of 15% and aggregate caps of 10% on all pre-revenue stocks and 15% on all Russia-listed stocks.

New York-headquartered Global X has made a significant push into Europe since debuting its first funds on the continent in December 2020. The firm now offers a diverse suite of 20 thematic ETFs targeting the investment themes of US infrastructure, cloud computing, video games & Esports, telemedicine & digital health, lithium & battery tech, robotics & AI, copper miners, autonomous & electric vehicles, cybersecurity, the internet of things, fintech, genomics & biotechnology, renewable energy producers, digital infrastructure, clean technology, e-commerce, blockchain, and clean water.