Battery technology is a pretty exciting space right now. The world needs more energy and, preferably, it needs to be clean. There is already an existing threat to fossil fuels, not only from a supply point of view, but simply because of public pressure. The world wants clean energy and batteries will play a key role in delivering it.
Much like the technology space in general, it can be very challenging for an investor to choose a particular battery technology company to invest in. As an alternative, I have found an ASX exchange-trade fund (ETF) that allows investors to gain exposure to this exciting industry, without the legwork and risk involved in a single company selection.
Introducing ETFS Battery Tech & Lithium ETF (ASX: ACDC)
This ASX ETF, offered by ETF Securities, provides investors with exposure to the energy storage and production industry. It holds shares in companies involved in both the supply chain and production of battery technology and lithium mining, thereby providing exposure to the whole industry. ETF Securities states on its website that the “demand for energy storage is being driven by the movement towards emissions reduction and renewable energy, such as solar and wind.”
Why battery technology?
Battery technology offers an energy storage solution that is becoming more and more prevalent in everyday life. Lithium-ion batteries are at the cutting edge of current product offerings. Some researchers believe that we might even see further development and advancement through related battery technology such as lithium-sulfur and solid-state batteries.
There is some very exciting work happening in this sector.
ETF Securities believes that battery technology is central to the growth of renewable energy and vehicle usage. I would agree. This means that investors in battery technology are also ‘doing their bit’ to help the planet, if you like. Whilst I’m not a die-hard environmentalist, I certainly prefer to invest in positive change where I can.
If you’re keen to bolster your contribution to environmental protection, investing in clean energy is one way to help effect real, long-term change. Companies which are involved in the battery supply chain are directly assisting with the global transition to clean energy.
The Battery Tech & Lithium ETF aims to track the performance of the The Solactive Battery Value-Chain Index (USD). This index follows the performance of companies that are providers of electro-chemical storage and technology in the battery technology space. It also tracks mining companies that produce metals used for producing lithium batteries.
The companies in this index related to energy storage technology have been taken from the list of projects provided by Clean Horizon’s Energy Storage Source. These are electrochemical companies that have been identified as energy storage technology manufacturers. Companies related to mining have been taken from Fastmarket’s Metal Bulletin which includes those producing battery-grade lithium.
Since its inception in September 2018, the Battery Tech & Lithium ETF has returned approximately 18% for investors (at the time of writing). During the market crash in March this year, the ETF fell almost 30%. As this was a market-wide event, I’m more interested in the recovery. Whilst most companies are regaining lost ground, this ETF has exceeded previous highs by almost 5%. It’s an impressive recovery, rising close to 50% since its March lows of $40 to currently trade above $60.
It should also be noted that this ETF has a dividend yield of around 1.5%.
Holdings and fees
A few of the top holdings in this ASX ETF include Samsung, Pilbara Minerals Ltd (ASX: PLS), Toshiba Corp and Renault. The holdings are also global, providing exposure to countries such as Australia, Germany, Japan, Switzerland and the United States among others. Management fees are 0.69% per year.
Whilst the Battery Tech & Lithium ETF might not be the highest performing ETF on the ASX, I like the idea of investing in a brighter future. If I can make a reasonable return and support clean energy at the same time, it’s a win-win in my book.