- The ALPS Clean Energy ETF (ACES) rallied 17.35% in May as clean energy stocks impressed on quarterly earnings and event-driven news. High interest rates have impacted a number of clean energy projects across the globe, however, as the US Treasury has codified many clean energy tax credits so far in this 2024 election year and global central banks prepare to potentially cut interest rates, clean energy laggards are starting to show a little sunshine.
- ACES’ Solar segment was bright in May as the solar inventory correction is poised to abate in the second quarter of 2024. Meanwhile, the Biden Administration slapped additional tariffs on imported Chinese solar cells last month with China pledging to halt its dumping practices. Solar cell bellwether, First Solar Inc. (FSLR US, 8.30% weight*), rocketed 54.15% in May after reporting strong Q1 earnings and 2024 guidance that led to bullish commentary from analysts around its growth potential from the enormous AI (artificial intelligence) electricity usage. Seven of ten ACES’ solar names posted double-digit returns last month, including SunPower Corp (SPWR, 0.30% weight*), which rallied over 62% after announcing the integration of Tesla’s (TSLA US, 4.24% weight*) storage battery into its residential solar system offering.
- Government policy continued to shape the clean energy landscape with Plug Power Inc. (PLUG US, 2.40% weight*) gaining nearly 45% last month after the Biden Administration offered the green hydrogen producer a conditional commitment for $1.66 billion in loans to help construct six new green hydrogen production plants. Ameresco Inc. (AMRC US, 1.24% weight*), a clean energy project developer, ripped over 74% in May following impressive Q1 earnings with its contracted backlog of projects rising 45% year-over-year. Also seeing higher demand within energy storage, Fluence Energy Inc. (FLNC US, 1.62% weight*) returned 40.86% in May after posting strong Q1 earnings and cash flows with analysts generally positive on its asset-lite regional manufacturing to scale its battery production.
- EV (electric vehicle) names were mostly higher last month after the Biden Administration placed a 100% tariff on any imported Chinese EVs. EV charging company, ChargePoint Holdings Inc. (CHPT US, 0.68% weight*), was the top gainer in ACES’ EV segment after gaining 26.32% upon Tesla discontinuing its EV charging business. Lastly, renewable energy utility, Brookfield Renewable Partners L.P. (BEP-U CN, 5.89% weight*) jumped over 24% last month after announcing it will provide over 10 GW (gigawatts) of new renewable power capacity in the US and Europe to Microsoft Inc. (MSFT, not in ACES), equivalent to ten nuclear power plants.
“Regardless of whether the world heads for net-zero or it ultimately proves a stretch too far, the era of fossil fuels’ dominance is coming to an end. Even if the transition is propelled by economics alone, with no further policy drivers to help, renewables could still cross a 50% share of electricity generation at the end of this decade.”
– BloombergNEF New Energy Outlook, May 21, 2024
Clean Energy Diversification Sets ACES Apart from the Pack
- Despite weak clean energy stock prices in 2023/24, growth across most clean energy segments continues to excel as energy independence is first and foremost on every country’s mind, especially with geopolitical tensions rising across the globe. Although reaching Net-Zero carbon emissions globally may seem more optimistic than realistic, the reality is that these global goals are still attainable with an eye-popping $215 trillion in required spending by 2050, equating to less than 5% of global GDP, annually, per BloombergNEF.
- The ALPS Clean Energy ETF (ACES) provides a pure-play exposure to US and Canadian clean energy names with diversification across seven clean energy segments (Solar, Wind, Fuel Cell/Hydrogen, Hydro/Geothermal, Energy Management & Storage, Electric Vehicles and Bioenergy). We believe it is important to be diversified across the clean energy segments as they unfold at various stages with new technologies and cost declines driving further adoption. Focusing on clean energy companies within the US and Canada, which tend to be more financially transparent and less levered with debt, is a differentiator for ACES that helped its relative performance in May, as investors begin to look for opportunities with clean energy fundamentals set to improve.
- Despite lower clean energy stock prices, global investment in the Energy Transition reached $1.77 trillion in 2023, 17% higher than 2022.1
- ACES’ seven clean energy segments are set to capture direct investment in renewable energies that will require at least a 54% increase in energy transition investment from 2023 levels over the next seven years (2024-2030).1
Performance Summary
| Cumulative | Annualized |
|||||||
| 1 M | 3 M | 6 M | YTD | 1 Y | 3 Y | 5 Y | SI | |
| ACES - NAV (Net Asset Value) | 17.35% | 5.38% | 1.23% | -12.01% | -35.51% | -26.79% | 3.08% | 4.21% |
| ACES - Market Price | 17.77% | 5.40% | 1.56% | -11.92% | -35.53% | -26.84% | 3.06% | 4.19% |
| CIBC Atlas Clean Energy Index - TR | 17.37% | 4.93% | 0.81% | -12.41% | -35.65% | -26.78% | 3.24% | 4.54% |
| S&P 1000 Index - TR | 4.58% | 3.23% | 16.44% | 5.91% | 21.06% | 5.53% | 10.94% | 8.81% |
Source: Bloomberg L.P. and SS&C ALPS Advisors, cumulative performance as of 05/31/2024 and annualized performance as of 03/31/2024
Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com. Performance includes reinvested distributions and capital gains.
Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times.
Fund inception date: 06/28/2018
Total Operating Expenses: 0.55%
* Weight in ACES as of 05/31/2024
1 Source: BloombergNEF, as of May 2024
Top 10 Holdings
| First Solar Inc | 8.30% | Northland Power Inc | 4.64% | |
| Brookfield Renewable Partners LP | 5.89% | NEXTracker Inc | 4.64% | |
| Itron Inc | 5.17% | Darling Ingredients Inc | 4.47% | |
| Enphase Energy Inc | 4.76% | Tesla Inc | 4.24% | |
| Rivian Automotive Inc | 4.65% | Ormat Technologies Inc | 4.15% |
As of 05/31/2024, subject to change
Important Disclosures & Definitions
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemable.
Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.
All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.
Obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants and general economic conditions can significantly affect companies in the clean energy sector. In addition, intense competition and legislation resulting in more strict government regulations and enforcement policies and specific expenditures for cleanup efforts can significantly affect this sector. Risks associated with hazardous materials, fluctuations in energy prices and supply and demand of alternative energy fuels, energy conservation, the success of exploration projects and tax and other government regulations can significantly affect companies in the clean energy sector. Also, supply and demand for specific products or services, the supply and demand for oil and gas, the price of oil and gas, production spending, government regulation, world events and economic conditions may affect this sector. Currently, certain valuation methods used to value companies involved in the clean energy sector, particularly those companies that have not yet traded publicly, have not been in widespread use for a significant period of time. As a result, the use of these valuation methods may serve to increase further the volatility of certain clean energy company share prices.
The Fund seeks to track the underlying index, which itself may have concentration in certain regions, economies, countries, markets, industries or sectors. Underperformance or increased risk in such concentrated areas may result in underperformance or increased risk in the Fund.
The Fund may be subject to risks relating to its investment in Canadian securities. The Canadian economy may be significantly affected by the US economy, given that the United States is Canada’s largest trading partner and foreign investor. Any negative changes in commodity markets could have a great impact on the Canadian economy. Because the Fund will invest in securities denominated in foreign currencies and the income received by the Fund will generally be in foreign currency, changes in currency exchange rates may negatively impact the Fund’s return.
Micro-cap stocks involve substantially greater risks of loss and price fluctuations because their earnings and revenues tend to be less predictable (and some companies may be experiencing significant losses), and their share prices tend to be more volatile. The shares of micro-cap companies tend to trade less frequently than those of larger, more established companies, which can adversely affect the pricing of these securities and the future ability to sell these securities.
Smaller and mid-size companies often have a more limited track record, narrower markets, less liquidity, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. As a result, their performance can be more volatile, which may increase the volatility of the Fund’s portfolio.
The large capitalization companies in which the Fund invests may underperform other segments of the equity market or the equity market as a whole.
The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively.
CIBC Atlas Clean Energy Index (NACEX): an adjusted market cap weighted index designed to provide exposure to a diverse set of US or Canadian based companies involved in the clean energy sector including renewables and clean technology. The clean energy sector is comprised of companies that provide the products and services which enable the evolution of a more sustainable energy sector.
S&P 1000 Index: combines the S&P MidCap 400 and the S&P SmallCap 600 to form an investable benchmark for the mid- to small-cap segment of the US equity market.
One may not invest directly in an index.
ALPS Advisors, Inc., registered investment adviser with the SEC, is the investment adviser to the Fund. ALPS Advisors, Inc. is affiliated with ALPS Portfolio Solutions Distributor, Inc.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.
Not FDIC Insured • No Bank Guarantee • May Lose Value
CLN000426 09/30/2024
