How to position yourself in the ‘green rush’ of hydrogen

Hydrogen, a real unknown until not long ago, has already been recognized as a key vector to achieve carbon neutrality. In reality, this energy source has been used for many years, but it was not clean: fossil fuels, such as oil and gas, were required to obtain it. That is the so-called gray hydrogen, and the blue, whose use is, in 94%, industrial. See more articles on sustainability in theEconomist Sustainable Investment and ESG.

A new color has entered the scene: that of green hydrogen, which does not pollute, since it is produced through the electrolysis of water, by electric current generated by renewables -such as wind and solar-, which allows to separate hydrogen from oxygen. Its main brake so far has been its cost, but the increasing and cheaper offer of renewable energies improves the positioning of this technology. Now, how to invest in this very specific future issue? In Spain there are still very few products focused specifically on it.

Renta 4 has the Renta 4 Megatrends Ariema Hydrogen and Sustainable Energies FI, launched in January 2020. It is an equity product, sustainable by prospectus, which includes in its denomination the name of Ariema, a company specialized in green hydrogen that is an advisor to the fund. Last year it fell by 9.78%, according to data collected by Morningstar, dated December 31.

Among the main positions in the portfolio are the Norwegian Nel (dedicated to the production, storage and distribution of hydrogen); Californian electricity producer Bloom Energy; the American Plug Power (which develops hydrogen fuel cells); or the global energy group Cummins.

“For oil and gas companies, hydrogen investments can be seen as a way to stay relevant in a rapidly changing energy field,” Marouane Bouchriha, manager of the EdR SICAV Green New Deal fund at Edmond de Rothschild AM, recently noted.

In Spain, Iberdrola, Endesa, Repsol and Naturgy are called to get involved in this new wave, in addition to the current photovoltaic plants. In any case, “there are no companies with their own technology in the Spanish market,” laments Rafael Luque, CEO of Ariema.

Another product available for sale in Spain is the CPR Invest-Hydrogen, which is not even two months old: Amundi, parent of CPR AM, announced its launch on December 13. It is a fund labeled as Article 9 within the European Disclosure Regulation, which implies that it pursues a specific sustainability objective. In portfolio, companies involved in any sector of the hydrogen economy. According to the manager, “CPR AM is convinced that hydrogen will play a leading role in the energy transition and that, by 2050, it should represent 17% of energy demand and reduce greenhouse gas emissions by a third.”

“The investment universe of this new theme includes the entire hydrogen ecosystem, from the upstream -exploration and production- (with green energies), to the downstream -refinement and commercialization- (various users, such as the automotive and railway sectors), through storage and distribution, which gives it a great diversity,” they added.

It makes sense that the companies in charge of producing this energy in the future are utilities and energy companies, such as the current oil companies, since they are the ones that can more easily count on the renewable energy that is required in electrolysis. Engie is already developing a dozen projects at different points in the value chain; EDF partners with McPhy for the production and commercialization of hydrogen in heavy transport. RWE and Thyssenkrupp will produce this energy jointly from 2025. Linde and Air Liquide are two leaders in this field, in which they have been advancing for years. Shell in the Netherlands, BP in Australia and Equinor in the UK are also promoting green hydrogen projects.

Clean Energy Funds

Beyond the products focused on it, it is possible to invest in hydrogen through more generic clean energy products. For example, this energy source is part of the Pictet Clean Energy investment universe, which is positioned “in companies related to energy from renewable sources, as well as industrial energy efficiency, green buildings and electric mobility”. Its manager, Xavier Chollet, explains that the ambitious CO reduction target₂ “implies installing green hydrogen capacity to reach 80 GW in 2030, with an investment of 44,000 million”, so “that the weight of hydrogen in the European energy mix reaches 13 to 14% by 2050, compared to the current 2%”.

For its part, the Candriam Sustainable Equity Climate Action has an exposure to hydrogen of approximately 6%. 3.6% of the portfolio is invested in production and infrastructure companies (such as Air Liquide, or the Us Air Products and Chemicals); another 1.85% goes to electrolysis companies (such as Nel or ITM Power); and around 0.9%, to battery manufacturers (such as Ceres Power Holding).

Source: The Economist