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A new study for BlackRock shows exactly how active funds have an edge moving forward in the transition to net-zero emissions. Active investors’ advantage over traditional investors comes by incorporating sustainable insights, identifying climate-related financial catalysts, and seeking investment in emerging tech. Rich Kushel, Senior Managing Director at BlackRock says their strategies can identify companies and data points that generate a higher alpha. BlackRock is putting their money where their mouth is by launching an array of new active ESG funds across bond and equity markets targeting value or growth in different capitalization categories. In total, there will be nine new funds with ESG objectives.
FINSUM: The traditional rules of investment haven’t applied to ESG and technology, so a new set of analytical insights and active management may outperform traditional analysis.
Environmental, social, and governance investing drew in almost $35 trillion last year and that number is expected to grow another 42% by 2025, and while those dollars might be better for the environment the large inflows from unseasoned investors are pushing ESG into a price bubble. Large inflows are can disregarding traditional financial discipline which can affect debt/equity ratios, dividends, and distort valuations for future mergers and acquisitions. New companies in the onset of their financial growth are already being evaluated at 15 times revenue, on top of that investments in the traditional sector are suffering as outflows continue this could cause supply shortages and further inflation. Continued inflows into ESG could swell the bubble further and risk a collapse.
FINSUM: ESG could be swelling into risky territory, investors should be cautious particularly with retirement vehicles.
A blend of hope and fear has given hydrogen stocks a boost over the last few days. The UN just released the first of a six-part series on climate change, which has been described as sounding a "code red for humanity." But at almost the same time, the US Senate passed President Biden's $1 trillion Infrastructure Bill, including significant investment in decarbonization and green hydrogen, offering hope that leaders will hear the wake-up call.
The UN report states that within 20 years, the world will exceed the Paris climate accords' target of limiting global warming to 1.5℃ above previous levels, and without harsh, swift action, temperatures could rise by 2.7℃ by 2100. The report's timing, while wildfires are destroying thousands of acres and millions of homes in the US, Greece, Turkey, and Italy, and floods have hit Turkey, India, and parts of the US, makes it impossible to ignore.
Green hydrogen offers hope for the future
There's no single solution to the climate crisis. Planting trees and cutting energy usage are important, but we also need to replace carbon-heavy fuels with alternatives like green hydrogen.
Hydrogen fuel is produced using electrolyzers to harvest hydrogen molecules for conversion into fuel. Until recently, most hydrogen was "gray hydrogen," made using fossil fuels, but today's "green hydrogen" uses renewable energy sources, resulting in energy that's pollution and emissions-free.
Hydrogen is ideally suited as a replacement fuel source. It's abundantly available across the planet in the form of water; it's energy-dense, giving it a long-duration discharge cycle that can store energy and release it later at times of peak demand; it's more stable than solar or wind power, and as a molecule-based fuel, it can be used by high-polluting industries that can't switch to electrification.
All eyes are turning to green hydrogen
Private investors and national leaders alike recognize the importance of investing in hydrogen stocks to support the development of green hydrogen production. The US government’s Infrastructure Plan includes:
- Building 15 decarbonized hydrogen demonstration projects
- Funding R&D in advanced hydrogen electrolyzers
- Redirecting tax credits from fossil fuel producers to industrial decarbonization
- Incentivizing adoption of hydrogen-powered fuel cell (FCEV) and electric vehicles (EV)
That's not the only legislation pushing green hydrogen ahead. In June, the US Energy Secretary
Last week, a bipartisan Clean Hydrogen Energy Act was presented to the House of Representatives, proposing a hydrogen R&D program that would focus on driving down the costs of hydrogen production, transportation, and storage.
“In the fight against climate change, hydrogen has the potential to be the best tool we have,” said Mike Doyle (D-PA), one of the 3 co-sponsors of the bill. “Hydrogen can decarbonize transportation, power generation, and the industrial sector all while utilizing existing infrastructure and fuel supplies.”
Green hydrogen projects have mushroomed over the past few months. Leading hydrogen cell producers Plug Power broke ground on a $84 million hydrogen refinery in Georgia, USA, and hydrogen company FuelCell Energy secured $15 million to build a 7.4 megawatt fuel cell project in Connecticut. Cities are adopting hydrogen FCEV buses and trains; the Port of Los Angeles rolled out five hydrogen-powered FCEVs and opened two hydrogen fueling stations; and even big oil and gas companies are ramping up investment in green hydrogen production.
Green hydrogen stocks are benefiting from the mood of the moment
All of this makes investors sit up and take notice of hydrogen companies stock. For example, hydro stocks like Plug Power, Ballard Systems, Bloom Energy, and FuelCell Energy all rallied over the past week.
Investors looking to spread their exposure to hydrogen across as many of the potentially best hydrogen stocks as possible could consider a hydrogen ETF like Defiance's HDRO ETF. HDRO is a relatively low cost, accessible way to gain exposure to a number of leading hydrogen companies' stocks. It is just one of Defiance’s suite of disruptive ETFs.
N.b. This is sponsored content and not FINSUM editorial
Read more about HDRO here, including current holdings and performance: https://www.defianceetfs.com/hdro/. Fund holdings are subject to change and should not be considered recommendations to buy or sell any security.
The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.
Investing involves risk. Principal loss is possible. As an ETF, HDRO (the “Fund”) may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. It is not possible to invest directly in an index.
A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in hydrogen and fuel cell companies. Such companies may depend largely on the availability of hydrogen gas, certain third-party key suppliers for components in their products, and a small number of customers for a significant portion of their business.
The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.
HDRO is new with a limited operating history.
Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.
HDRO’s gross expense ratio is [0.3%] Commissions may be charged on trades.
The Defiance ETFs are distributed by Foreside Fund Services, LLC.
 "Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy" March 31, 2021 https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html
 "Biden administration launches program to cut cost of climate-friendly hydrogen production" June 7, 2021 https://news.yahoo.com/biden-administration-launches-program-cut-121558346.html
 "Plug Power Is Still Undervalued as the Good News Keeps Coming" June 10, 2021 https://www.nasdaq.com/articles/plug-power-is-still-undervalued-as-the-good-news-keeps-coming-2021-06-10
 "Reps. Doyle, Fitzpatrick and Lamb introduce clean hydrogen energy act" August 6, 2021 https://dailyenergyinsider.com/policy/31424-reps-doyle-fitzpatrick-and-lamb-introduce-clean-hydrogen-energy-act/
 "Plug Power breaks ground on $84m liquid green hydrogen plant in Georgia, US" August 10, 2021 https://www.h2-view.com/story/plug-power-breaks-ground-on-84m-liquid-green-hydrogen-plant-in-georgia-us/
 "Why Ballard Power, Plug Power, Bloom Energy, and Especially FuelCell Energy Stocks Popped Today" August 9, 2021 https://www.fool.com/investing/2021/08/09/why-ballard-plug-bloom-fuelcell-stocks-popped/
 "Port Of Los Angeles Demonstrates Hydrogen Fuel Cell Electric Trucks" June 10, 2021 https://www.fleetequipmentmag.com/port-los-angeles-hydrogen-fuel-cell-electric-trucks/
 "Big Oil Companies Push Hydrogen as Green Alternative, but Obstacles Remain" July 26, 2021 https://www.wsj.com/articles/big-oil-companies-push-hydrogen-as-green-alternative-but-obstacles-remain-11627297201
 "Why Plug Power, Bloom Energy, and FuelCell Energy Stocks Rallied Today" August 10, 2021 https://www.fool.com/investing/2021/08/10/why-plug-power-bloom-energy-and-fuelcell-energy-st/ "Why Ballard Power, Plug Power, Bloom Energy, and Especially FuelCell Energy Stocks Popped Today" August 9, 2021 https://www.fool.com/investing/2021/08/09/why-ballard-plug-bloom-fuelcell-stocks-popped/
ESG is taking over Europe and PWC is forecasting that ESG could make up €775.7bn to €1.2tn by 2025. That figure would make ESG 27-42% of Europe’s entire private financial market, for context it is about 15% currently. Driving that projection is the EU’s new sustainable finance disclosure regulations. Almost a third of the firms surveyed cited regulation as a primary force pushing their ESG investment. Sustainable investing in Europe is also seeing large growth in a public investments like pension funds. Finally, PwC said they see a new wave of private funds coming in the future rather than a re-rigging of existing financial funds to be more ESG friendly.
FINSUM: Public investment is a critical piece of Europe’s ESG investment, which is why it was very important when the U.S. opened the doors for public sustainability investment recently.