Global X Wind Energy ETF

overall rating:

1.5

planets

Usman Iqbal
2/25/2022
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A relatively new fund, the Global X Wind Energy ETF (ticker symbol WNDY) is an ESG fund that seeks to invest in companies positioned to benefit from the advancement of the global wind energy industry. According to their website, this includes companies involved in wind energy technology production, the integration of wind into energy systems, and the development of turbines that harness energy from wind and convert it into electric power. Their objective is to provide investment results that correspond to the price and yield performance of the Solactive Wind Energy Index, which I will get into detail later. The fund was founded in September 2021 and is run by Global X, a New York-based ETF provider.

What it's made of:

1.75

The Global X Wind Energy ETF focuses on investing in companies involved in developing and integrating wind power technology. Their share is worth $21.69 and has a NAV of $20.72.  As of January 31, 2022, WNDY has 30 holdings and $3.94 million worth of assets under their management. Most of their investments are based in China (42%), with Denmark (22%), Canada (19%), and Germany (4%) trailing behind. Investments in the United States only make up 1.75% of the fund’s total investment. A quick search shows that China is actually the leading nation when it comes to wind power capacity. This is interesting because China also happens to be the largest emitter of greenhouse gasses. This asks the question, does investing in renewable energy companies support ESG principles if these companies are coming from the biggest GHG producer? Their top ten holdings include Northland Power Inc (12%), Orsted A/s (12%), China Longyuan-h (11%), Vestas Wind Systems (10%), and Titan Wind-a (5%) to name a few. The first, Northland Power, is a power producer that develops and operates clean green power infrastructure, such as solar and wind assets around the world. The company Orsted is a Danish power company and the largest developer of offshore wind power in the world. This is an interesting company because until 2015, Orsted was focused on oil and gas. However, Orsted’s turn towards renewable energy serves as an example that oil and gas companies can make a clean transition into renewables. In the sector breakdown, 52% of their investments are in utilities, 40% are in industrials, and 7% are in materials. The utilities sector specializes in delivering electric power to people; this includes the development of renewable energy, so seeing an ESG fund invest mainly in utilities is pretty standard and a good sign. Interestingly, the energy sector doesn’t consist of many renewable clean energy companies. It mostly consists of companies invested in oil and gas exploration, which is directly countering sustainability goals. Most renewable energy companies are found under utilities. If ESG investing is to successfully expand in the future, I believe it will have to take over the energy sector as well to outcompete the oil and gas industry.

How it's made:

2

WNDY makes investments based around three key principles: high growth potential, advancing clean technologies, and having a conscious approach. As mentioned earlier, Global X seeks to provide investment results that correspond to the price and yield performance of the Solactive Wind Energy Index. The Solactive Wind Energy Index is designed to track the performance of companies that have significant exposure to the field of wind energy technology. “Significant exposure” includes the following Wind Energy activities: wind energy systems, wind power production, wind energy technology, and wind power integration/maintenance. According to the WNDY index methodology guidelines, each company is classified according to the extent to which it generates revenues from the previously mentioned Wind Energy activities. The two classifications for companies are Pure-Play (company must derive 50% of revenue from Wind Energy activities) and Pre-Revenue (company has primary business operations in Wind Energy activities but does not currently generate revenue.) Another key aspect of the Solactive Wind Energy Index is that selected companies must comply with UN Global Compact principles. These principles act as rules for businesses to ensure human rights, labor laws, environmental responsibility, and anti-corruption. WNDY is transparent with their methodologies on which companies they invest in, and I appreciate their organized approach on how companies are selected. 

Index components are weighted according to their Free Float Market Capitalization to ensure that the Solactive index doesn’t become outdated and obsolete, it undergoes a semi-annual rebalancing schedule every May and November. It’s great that this information is included in the index methodology, as I think most people don’t consider that the method used to select companies to invest in might become dated over time.

Who makes it:

0.5

The WNDY fund is owned and operated by Global X, a fund management company. Global X has 48 offices around the world and over $644 billion in assets under management, which includes the WNDY fund. The CEO of Global X is Luis Berruga. He has a strong background in finance, working previously in Wealth & Assets for Morgan Stanley. Other team members include Jon Maier (CIO), Joe Costello (CCO), and Susan Lively (General Counsel) to name a few. Like Berruga, they all have a strong background in finance but nothing in sustainability or environmental compliance. Even though WNDY’s portfolio shows an impressive track for renewable energy investments, I think it would be nice to see more people with a sustainability background as part of the team. This is true for many ESG funds. I tend to only see finance backgrounds leading these funds, and I think having more people with an education in environment-related fields can be strongly beneficial for funds trying to figure out which companies to actually invest in. Nonetheless, it seems WNDY is still a supporter of sustainable economics through their investments. 

Global X has various ETFs that can be viewed on their website. The largest is the Nasdaq 100 Covered Call ETF, or QYLD. This fund’s top holdings include mega tech corporations like Apple, Amazon, Microsoft, and Alphabet Inc. Seeing their top fund include these kinds of corporations that have been criticized for environmental issues is alarming. I understand that this one specific fund isn’t targeted towards ESG, but it is still owned by Global X. For that reason, I have to give this section a lower score.