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LGIM expands ETF range with the launch of Energy Transition Commodities ETF

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Legal & General Investment Management has announced the expansion of its ETF range with the launch of the L&G Energy Transition Commodities UCITS ETF. 

The firm writes that the fund aims to provide exposure to the three supporting pillars of the energy transition through commodity futures, harnessing the growth potential embedded within the next chapter of the global energy story.

The fund, which is a first to market, offers investors liquid and diversified exposure to a combination of commodities central to the energy transition; providing access to three distinct commodity groups with supportive demand side dynamics:

Transition metals that are needed to produce, store and distribute clean energy 

Lower-carbon transition energy sources such as natural gas and ethanol; which can help overcome peak energy demand and the challenge of ‘hard to abate’ sectors

Carbon pricing that increases the cost of polluting activities, incentivising the switch to low-and-no-carbon activities

Offering diversification and hedging opportunities, the firm writes that the fund provides a differentiated proposition with over 50 per cent of the constituents not typically found in traditional commodity portfolios – many of which have been made available to UCITS investors for the first time. The fund provides access to 18 liquid commodities in a diversified and liquid manner, including an allocation to carbon markets.

Illustrating LGIM’s strategic intent to diversify, the firm writes that the fund builds on LGIM’s broader range of commodities ETFs – including 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 reflects the continued demand for investment solutions with low correlation to other asset classes, allowing clients to tap into potential growth opportunities across the real economy. Today’s launch also complements LGIM’s thematic ETFs within the energy and resources range, which include the L&G Clean Energy UCITS ETF, L&G Battery Value-Chain UCITS ETF and L&G Hydrogen Economy UCITS ETF; all of which provide investors access to the growth potential of the energy transition.       

Aanand Venkatramanan, Head of ETFs, EMEA at LGIM says: “We are incredibly excited to bring this innovative commodities ETF to market, providing a truly unique proposition which enables investors to seek to benefit from the significant growth potential of the energy transition, whilst also providing inflation risk mitigation and uncorrelated exposure.

Like the industrial revolution, the energy transition is a commodity story, but with a new cast of characters. 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.”

Steven de Vries, Head of Wholesale UK, Europe and Latin America at LGIM says: “Demand for strategies that provide inflation risk mitigation and uncorrelated market exposure has been significant of late, not least due to the macroeconomic backdrop. Overlay this with the uniqueness of the proposition the Energy Transition ETF presents, and this becomes a particularly compelling strategy. We’re extremely proud of today’s launch; allowing investors to maximise their exposure to the energy transition through a diversified, liquid, and truly differentiated strategy.”

The fund will be available to both wholesale and institutional investors, registered in the UK, France, Germany, Italy, Netherlands, Norway, Denmark, Sweden, Finland, Austria, Luxembourg, Switzerland and Spain, as well institutional investors in Singapore. It has been categorised as Article 6 under the Sustainable Finance Disclosure Regulation and will be managed by LGIM’s expert ETF team.

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