Legal & General Investment Management (LGIM) has launched the L&G Energy Transition Commodities Ucits ETF offering exposure to “commodity groups central to the energy transition”.
The fund, categorised as Article 6 under the EU Sustainable Finance Disclosure Regulation, provides access to three commodity groups: transition metals, lower-carbon transition energy sources and carbon pricing.
Transition metals are needed to produce, store and distribute clean energy while lower-carbon transition energy sources such as natural gas and ethanol can help overcome peak energy demand and the challenge of hard-to-abate sectors. Additionally, carbon pricing, which increases the cost of polluting activities, incentivises the switch to low-and-no-carbon activities.
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According to the asset manager, the fund offers diversification and hedging, with “over 50% of constituents not usually found in traditional commodity portfolios.” It also provides access to 18 liquid commodities, including carbon markets.
Aanand Venkatramanan, head of ETFs, Emea at LGIM, commented: “Compared with today’s energy mix, we believe the energy transition is built on new inputs, which in our view are underrepresented in current commodity portfolios. This is why we built the ETF around transition metals, transition energy and carbon pricing; capturing the next phase of demand, and opportunity, in the story.”
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Steven de Vries, head of wholesale UK, Europe and Latin America at LGIM, added: “Demand for strategies that provide inflation risk mitigation and uncorrelated market exposure has been significant of late, not least due to the macroeconomic backdrop.”
The fund will be available to wholesale and institutional investors, registered in the UK, France, Germany, Italy, Netherlands, Norway, Denmark, Sweden, Finland, Austria, Luxembourg, Switzerland and Spain, as well as institutional investors in Singapore.
