Commodities

Invesco driven to launch electric vehicle ETF focused on commodities

While some miners operate more responsibly than others, and investors may have concerns about investing directly in a company that wasn’t managing its environmental impact well, the commodity itself isn’t good or bad, Mr. Bloom said. Consequently, the fund offers a way for investors to get direct exposure to essential building blocks for EVs without necessarily having to invest in a company with an ESG score “that may or may not pass muster,” he said.

As for lithium, many people have asked why it’s not in the portfolio, Mr. Bloom said. While the ETF doesn’t currently invest in lithium, “it’s on the menu,” he said.

“It’s just that the lithium futures don’t meet the minimum liquidity thresholds, and every six months we reevaluate,” Mr. Bloom said. “So, something like lithium can come into the portfolio once it meets those liquidity thresholds from an investability standpoint and a risk-management standpoint.”

Invesco’s impetus to bring the EV fund sprang both from institutional investors’ requests as well as its own research, he said. Around the same time last year that the institutional investors were making those requests, Invesco’s research was indicating that demand for those EV-related commodities was likely to spike, Mr. Bloom said.

“…We were coming to the realization based on demand and supply forecasts that the energy transition was likely to spark an accelerated growth in demand for these critical minerals,” he said. “And when you looked two or three years out — this was a year ago — those demand curves started to pull away from the projected supply curves.”

Mr. Bloom cited an executive order President Joe Biden signed on Aug. 5, 2021, that set a goal for half of all new passenger cars and light trucks sold in 2030 to be EVs.

“We don’t have current capacity within the mining industry to meet that demand,” he said, adding that if President Biden wants EV production to increase dramatically in eight years but it takes 10 years to get a new mine permitted, it’s likely that higher prices will be needed not only to stimulate capital investment from the mining industry but also to get the attention of regulators, “who need to come up with a workable permitting process.”

“The risk-reward looked really good to us,” he said.

Atlanta-based Invesco had about $1.6 trillion in assets under management worldwide as of March 31.

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