Many institutional investors are recognizing the benefits of allocating to commodities, both for diversification and to access opportunities presented by the global energy transition to a green economy.
“Ironically, ESG policies have limited investment in the metals and mining sector, but there can be no decarbonization without industrial metals.
Abrdn recently launched the abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF , an exchange-traded fund that seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Bloomberg Industrial Metals Total Return SubindexSM by holding copper, aluminum, zinc and nickel futures contracts.
monetary policy remains supportive, and the expected tapering of asset purchases by the Federal Reserve doesn’t necessarily suggest a rise in interest rates.
Finally, the decarbonization shift is the largest undertaking of its kind attempted by humankind — and it represents $51 trillion in gross domestic product in the U.S., Western Europe and China alone, Minter said.
Recognize the inflection point Investors need to see that industrial metals are a key resource as the global economy adapts to the new realities brought on by climate change.
But before someone orders a new Tesla on an app, someone else has to pull 300,000 pounds of raw material out of the ground to manufacture it,” Minter said.
An average wind turbine and a one-gigawatt grid-scale battery can each have more than four tons of copper,” he said.
“When we start to add these up, there easily could be 15% higher demand just in the next few years.” At the same time, supply is highly constrained.
But on the supply side, for example, China has capped aluminum smelting at 45 million tons in order to meet energy-reduction targets.” Additional supply will have to come from countries with much higher energy costs, and if aluminum producers have to pay carbon offsets, production costs could rise commensurately, he explained.
“From an investment perspective, copper and aluminum and other metals are interesting to us.
For instance, the abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Bloomberg Commodity Index 3 Month Forward Total ReturnSM, he noted.
“In the U.S., we’ve made tremendous progress in reducing our carbon footprint over the last 10 to 15 years because we’ve shifted from coal to natural gas to produce electricity, which has driven up demand.
Even in China and Germany, electric vehicle sales have been dependent on subsidies, and it will be future incentives that will encourage people to switch to renewable resources.
Because the Fund’s performance is linked to the performance of highly volatile commodities, investors should consider purchasing shares of the Fund only as part of an overall diversified portfolio and should be willing to assume the risks of potentially significant fluctuations in the value of the Fund.
This sponsored content is published by the P&I Content Solutions Group, a division of Pensions & Investments.