Investors in green energy exchange traded funds turned their attention to comments from BlackRock (BLK) on Wednesday. The asset manager issued its outlook on the sector, arguing that clean energy has reached a tipping point.
The commentary put a spotlight on clean energy ETFs, impacting funds like iShares Global Clean Energy ETF (NASDAQ:ICLN), Invesco Solar ETF (NYSEARCA:TAN), First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN), Invesco Global Clean Energy ETF (PBD), First Trust Global Wind Energy ETF (NYSEARCA:FAN), and the SPDR S&P Kensho Clean Power ETF (CNRG).
BlackRock listed three reasons for the tipping point: geopolitical issues, affordable clean power and an increased demand for green energy. Here's a breakdown of its argument:
Geopolitics: BLK outlined how Russia’s invasion of Ukraine has highlighted the importance of clean energy. In a note the firm stated: “Clean energy sources require favorable natural conditions — such as wind, geothermal, hydroelectric or sun — muting the geopolitical dynamics that make fossil fuels-based energy systems unreliable.”
Affordability: The rise in use of clean energy has in turn dragged down the price of clean power sources, making it a more enticing choice. According to BLK: “Solar and wind power are now 1/3 of the price of coal and a little less than 2/3 of the price of natural gas.”
Demand: More and more nations have plans in place to shift their energy needs away from fossil fuels and towards cleaner energy supplies. Earlier this year Germany publicized its plan to fully transition to clean power by 2035, 15 years earlier than its previous target. BlackRock said: “We believe growing use of clean energy should continue to accelerate in the coming years.”
With a global transition agenda towards greener energy sources underway it helps bolster the backing of many green energy stocks and ETFs. Still, even with these macro factors providing long-term support for the industry, green energy funds have suffered so far in 2022.
Year-to-date price action: ICLN -2.6%, TAN -0.8%, QCLN -15.7%, PBD -17.3%, FAN -6.8%, and CNRG -3%.
In related green energy news, President Joe Biden has issued tariff relief for solar panels, which prompted a rally in the solar sector and also spilled over into the general green energy group.