Legal & General Investment Management (“LGIM”) has announced the expansion of its ETF range with the launch of the L&G Energy Transition Commodities UCITS ETF (“the Fund”). The ETF aims to give investors exposure to the three main aspects of the energy transition through commodity futures, taking advantage of the growth potential in the next phase of the global energy.
The Fund, which is the first of its kind, provides investors with flexible and varied access to a mix of commodities crucial to the energy transition. These include access to three distinct commodity groups with supportive demand side factors:
- Transition metals that are required for producing, storing, and distributing clean energy
- Lower-carbon transition energy sources like natural gas and ethanol, which can help meet peak energy demand and address the challenge of ‘hard to abate’ sectors
- Carbon pricing that raises the cost of polluting activities, encouraging the shift to low-and-no-carbon activities
The Fund offers diversification and hedging options, with over 50% of the components not typically found in traditional commodity portfolios – many of which are available to UCITS investors for the first time. It also provides access to 18 liquid commodities in a diversified and liquid manner, including an allocation to carbon markets.
Demonstrating LGIM’s strategic intent to diversify, the Fund adds to LGIM’s wider range of commodities ETFs – such as the L&G All Commodities UCITS ETF, the L&G Longer Dated All Commodities UCITS ETF and the L&G Enhanced Commodities UCITS ETF. The expansion of the range responds to the ongoing demand for investment solutions with low correlation to other asset classes, enabling clients to access potential growth opportunities in the real economy. This launch also complements LGIM’s thematic ETFs within the energy and resources range, including the L&G Clean Energy UCITS ETF, L&G Battery Value-Chain UCITS ETF and L&G Hydrogen Economy UCITS ETF; all of which offer investors access to the growth potential of the energy transition.
“Similar to the industrial revolution, the energy transition is a commodity story but with new factors. Compared to today’s energy mix, the energy transition is based on new elements that we believe are not well-represented in current commodity portfolios. This is why we designed the ETF around transition metals, transition energy, and carbon pricing; capturing the next phase of demand and opportunity in the energy transition.”
The Fund will be open to both wholesale and institutional investors in the UK, France, Germany, Italy, Netherlands, Norway, Denmark, Sweden, Finland, Austria, Luxembourg, Spain, and institutional investors in Singapore. It has been classified as Article 6 under the Sustainable Finance Disclosure Regulation and will be managed by LGIM’s expert ETF team, which has become one of the largest global providers over the past 25 years.
