Hydrogen rally by 2030? Here’s an ETF that could ride the wave

BloombergNEF’s latest report, “Hydrogen Supply Outlook 2024: A Reality Check”, highlights a game-changing forecast for clean hydrogen, with estimated production growth up to 30 times by 2030, potentially reaching 16.5 million tonnes.

This increase highlights a significant transformation in energy production, shifting focus towards more sustainable sources in response to global climate neutrality goals.

However, the report also notes several challenges: current production, although growing, is still far from sufficient to achieve these ambitious goals. The sector will face not only technological but also economic obstacles, having to balance the costs and effectiveness of electrolysis, a key process in the production of green hydrogen, against cheaper but less environmentally friendly methods such as the production of blue hydrogen.

The role of blue hydrogen and market dynamics

Blue hydrogen, produced through the Steam Reforming (SMR) process, continues to play a crucial role in the current energy landscape thanks to its economic competitiveness. Despite the growing emphasis on green hydrogen, blue remains an essential component for a balanced energy transition, especially in Asian regions where investment in this technology is remarkably high. At the same time, the import and export dynamics outlined by BloombergNEF reveal a complex picture, with North America looming as a central hub in clean hydrogen distribution.

Despite this, export projections remain uncertain, reflecting the intricate web of energy policies, technological advancements, and economic priorities that will characterize the hydrogen market in the coming years. The realization of these projects will depend on strategic planning and ongoing investments, essential to overcome current barriers and realize the full potential of hydrogen as an energy carrier of the future.

Who has lost a lot in the last year: analysis of the Global X Hydrogen UCITS ETF

In the current context of global energy transition, hydrogen emerges as one of the key elements in the mix of solutions aimed at reducing dependence on fossil fuels. In this scenario, investment instruments such as the Global X Hydrogen UCITS ETF USD Accumulating play a crucial role. This ETF, which tracks the Solactive Global Hydrogen Index, offers investors the opportunity to participate in the growth of the hydrogen sector, a sector that is rapidly gaining ground due to its potential to provide clean and sustainable.

ETF Profile and Characteristics

Launched on 7 February 2022 and domiciled in Ireland, the Global X Hydrogen UCITS ETF has a relatively small assets under management of €5 million. This fund focuses exclusively on global stocks in the hydrogen sector, reflecting the social and environmental investment objective. The ETF is accumulating, meaning that dividends generated by holdings are reinvested, rather than distributed to investors, amplifying the effect of compound growth over time.

The investment strategy of the Global X Hydrogen UCITS ETF is based on full physical replication of the Solactive Global Hydrogen Index. This implies that the ETF purchases all components of the index to ensure an exact match with the performance of the index. With a total expense ratio (TER) of 0.50% per annum, the fund is positioned as a cost-effective option for investors seeking exposure to this emerging sector.

Composition and Performance

The fund is highly concentrated, with the top 10 holdings representing 77.46% of the total portfolio. These include leading companies such as Bloom Energy, NEL ASA, and Plug Power, which are at the forefront of developing hydrogen technologies. This high concentration may increase volatility risk, reflected in an annual volatility of 40.56% and a maximum decline since inception of -75.32%. These numbers highlight the challenges and opportunities in a rapidly evolving and highly innovative industry.

Risk and Sustainability

Despite the growth potential, the ETF presents significant risks, as evidenced by its high volatility and sharp declines in adverse market periods. However, for risk-conscious, long-term investors, the Global X Hydrogen UCITS ETF offers an opportunity to invest in a technology that could be crucial to the planet’s sustainable future. The absence of currency hedging adds layer of currency risk, particularly relevant given that the ETF is denominated in US dollars, while many of its holdings are located outside the United States.

Market Outlook

With governments around the world setting ambitious targets for reducing carbon emissions, hydrogen’s role as a clean energy source is potentially set to expand. Investing in an ETF that focuses on hydrogen could not only deliver returns but also contribute to a positive environmental impact.

The Global Despite challenges, such as market volatility and the newness of the hydrogen sector, the long-term outlook is promising. Investors who understand and accept the associated risks may find this ETF an attractive vehicle to contribute to and benefit from the hydrogen revolution.

Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings.

Original article published on Money.it Italy 2024-07-09 20:31:00. Original title: Idrogeno alle stelle entro il 2030. Ecco un ETF che potrebbe cavalcare l’onda