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Inside the New Green Shipping ETF

ETF Managers Group LLC recently announced the launch of the ETFMG Breakwave Sea Decarbonisation Tech Exchange Traded Fund BSEA.

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This story originally appeared on Zacks

ETF Managers Group LLC recently announced the launch of the ETFMG Breakwave Sea Decarbonisation Tech Exchange Traded Fund (ETF) BSEA. Let’s explore the possibilities of success of the fund.

- Zacks

ETFMG Breakwave Sea Decarbonization Tech ETF (BSEA) in Focus

The fund looks to provide investors access to a diversified set of global companies involved in actively reducing the environmental impact of the global maritime sector, including those that develop technologies, manufacture equipment or provide services related to marine or ocean decarbonization. The fund includes companies involved in cleaner propulsion (including alternative fuels, batteries and fuel cells), carbon capture technologies and offshore wind development.

The fund charges 75 bps in fees. NEL ASA (4.19%), ITM Power (4.02%) and YARA International (3.93%) are the top three stocks of the 50-stock fund.

How Does It Fit in a Portfolio?

Per the issuer, the shipping industry makes up about 3% of global carbon emissions, around 1 billion metric tons of greenhouse gases emitted yearly. Without efforts to cut back on emissions, this hazard is expected to surge.

The International Maritime Organization, a UN body, has enacted a strategy to lower CO2 emissions in the maritime industry by 70% from the 2008 levels within 2050 while net zero carbon emissions will need $50 trillion of investment by 2050, per the source.

“As the industry embarks on a multi-decade process of mandated decarbonisation, the Marine Money Decarbonisation Index will help investors participate in this significant opportunity,” said Matt McCleery, President of Marine Money, as quoted on the press release. So, the need for a green shipping ETF is understandable.

“Shipping will always remain a major part of the global economy, while the decarbonization transition will provide considerable investment opportunities that are still in their infancy,” said Hal Malone, Principal of Sea/Switch Partners, as quoted on the Press Release. About 90% of the world’s trade is carried by sea, making maritime shipping an important area.

Of late, we have seen a surge in investors’ interest in the shipping ETF. This has not missed fund issuers’ notice. Breakwave Dry Bulk Shipping ETF BDRY is up 346% this year.  The demand for shipping is high given the improvement in global economic growth and a commodity boom from easing COVID-led restrictions.

These factors are leading to very high freight rates. The space is also getting support from easy monetary and fiscal policies, supply-chain issues caused due to COVID-19 and higher demand from e-commerce companies.

Competition

The fund will face competition fromBDRY and SonicShares Global Shipping ETF BOAT, though the duo does not have any exposure to green technology. The expense ratio of BDRY 3.32% while BOAT charges 69 bps in fees. Hence, the expense ratio of BSEA looks reasonable and should not come in way of the asset generation of the fund. Moreover, due to its green exposure, BSEA looks to be a more socially responsible investment option (read: Guide to Socially Responsible ETFs).



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Breakwave Dry Bulk Shipping ETF (BDRY): ETF Research Reports

 

SonicShares Global Shipping ETF (BOAT): ETF Research Reports

 

ETFMG Breakwave Sea Decarbonization Tech ETF (BSEA): ETF Research Reports

 

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Zacks Investment Research