A ‘Green Transportation’ ETF Offers a Lot of Diversification, But Will It Make Investors a Lot of $?
Submitted by EnergyTechStocks.com
There’s a new way to invest in alternative energy. Well, sort of. Last week Invesco PowerShares launched its PowerShares Global Progressive Transportation Portfolio, an exchange-traded fund (ETF) that will track the Global Energy Efficient Transport Index from WilderShares LLC.
The new fund is among the most diversified of the rapidly-growing number of alternative energy funds, and while diversity is usually a good thing, in this case it could be a problem. It’s questionable whether committed “green” investors who tend to flock to solar and wind companies will see giant railroad companies such as CSX and Union Pacific as appropriate investments, although railroads are more energy efficient than trucks for carrying freight.
Likewise, they may not like the idea of investing in natural gas companies such as Enbridge and Williams, for while natural gas is a less polluting fuel than coal or nuclear, it’s still a fossil fuel.
To be sure, the fund includes firms whose green credentials are unquestionable, such as Ener1, the lithium-ion battery developer, and Quantum Fuel Systems Technologies Worldwide, which makes drive trains for electric vehicles. But with committed green investors likely already holding shares in “greener” funds that include these companies, they may not want to double-down, so to speak, on companies which, as everyone knows, carry a higher-than-average risk because they’re in a relatively new industry.
At first glance, the new ETF appears to offer a lot of geographical diversity, which for alternative energy is good, because so many of the most profitable green firms are outside the U.S. But it turns out that the U.S. firms represent over 40% of the index weight, with Canada another 10%. Despite their prominence in alternative vehicle development, Japan and China account for only 7.32% and 2.27%, respectively, of the index’s weight.
