ETFS Battery Tech & Lithium ETF
ASX Code: ACDC
ETFS Battery Tech & Lithium ETF (ASX Code: ACDC) offers investors exposure to the energy storage and production megatrend, including companies involved in the supply chain and production for battery technology and lithium mining. Demand for energy storage is being driven by the movement towards emissions reduction and renewable energy.
ACDC aims to provide investors with a return that, before fees and expenses, tracks the performance of the Solactive Battery Value-Chain Index. The Solactive Battery Value-Chain Index represents the performance of companies that are providers of electrochemical storage technology and mining companies that produce metals that are primarily used for the manufacturing of battery-grade lithium batteries.
ACDC uses a full-replication strategy to track the index, meaning that it holds all of the shares that make up the index. It is equal weighted, meaning each holding makes up the same portion of the portfolio each time the index is rebalanced and therefore contributes equally to overall performance.
Why consider ACDC
Efficient exposure to advances in battery technology and rising demand for lithium.
Global coverage to capture the growth of the industry as a whole.
Exposure to the green shift of renewable energy generation and storage.
Batteries are a growth area as they essential for storing clean energy. As the world transitions away from fossil fuels and towards solar, wind and hydro power, the demand for batteries is forecast to increase.
Batteries are also crucial for electric cars, which are expected to steadily displace internal combustion engine cars over the coming decades.
Outside of clean energy, batteries are required for mobile devices such as phones and laptops, which are being purchased in ever-greater number.
Lithium is the crucial element supporting batteries, as lithium-ion batteries are cheaper to produce, faster to recharge and longer lasting than alternatives.
Batteries are essential for supporting renewable energy and the transition away from fossil fuels. Recognising this, state and Commonwealth governments have introduced subsidies and programmes designed at boosting the uptake of batteries and electric cars.
Examples include South Australia’s Hornsdale Power Reserve, Queensland’s battery manufacturing precinct, the Commonwealth government exempting electric vehicles from fringe benefits and import taxes.
ACDC also includes an environmental, social and governance (ESG) screen aimed at severely restricting the ability of fossil fuel companies to be included in the index. The index prevents companies that make more than 25% of their revenue in oil or gas, or more than 30% of their revenue from thermal coal, being included in the index.
The index provider, Frankfurt-based Solactive AG, uses ESG data sourced from Minerva Analytics, an ESG research and data company based in the UK. Minerva conducts proprietary research on companies’ sustainability and governance activities to build data sets. Minerva’s datasets are used by Solactive to determine the final constituents in the index.
The strength of this data-driven approach to ESG is that it can be incorporated into an index, allowing for potentially lower-cost passive management. Limitations and risks of this approach include a lack of direct stewardship and potential for data errors.
The index universe for energy storage technology providers is comprised of projects identified from the Clean Horizon’s Energy Storage Source, classified as electrochemical, having an energy capacity of at least 1 MWh and identified as an energy storage technology manufacturer. The companies must also have a primary listing on an eligible exchange – if a subsidiary, then the parent company will be identified as part of the universe instead.
The index universe for mining companies is taken from Fastmarkets' Metal Bulletin, including all companies producing battery grade lithium, with their primary listing on an eligible exchange.
To be included in the index, companies must have a free-float capitalisation of at least US$200m (lower for existing constituents), have a mi