Fear of Heavy Rain and Drought... Eco-Friendly Investment Grows in the Stock Market

KRX Climate Change Solutions Index Tracking ETF
Records Over 15% Returns Since Last Month

Heightened Awareness of Abnormal Climate & Energy Security
Increased Benefits for Climate and Energy Companies Following US Inflation Reduction Act Passage

[Asia Economy Reporter Minji Lee] 'The worst drought in over 500 years, the heaviest rainfall in 105 years.'

As abnormal climate conditions plague various parts of the world, eco-friendly investments are gaining rapid momentum in the financial markets. With the passage of the U.S. Inflation Reduction Act, companies related to climate and energy are expected to benefit, further increasing investors' interest in green-themed investments.

As of 10:25 a.m. on the 16th, the TIGER KRX Climate Change Solution ETF was trading at 9,570 KRW, up 0.74% from the previous trading day. Since last month, it has surged 15%. This ETF groups domestic companies that can attract attention when climate change issues arise and uses the 'KRX Climate Change Solution Index' as its underlying index. KB, Samsung, NH-Amundi, and Shinhan also hold passive ETFs based on this index.

Additionally, among domestic listed ETFs, the ‘KINDEX U.S. Green Theme INDXX ETF,’ which invests in U.S.-listed companies generating more than 50% of their revenue from eco-friendly businesses, rose over 22% during the same period. The ‘KODEX U.S. Clean Energy NASDAQ ETF,’ which invests in companies with more than half of their sales coming from renewable energy, smart grids, batteries, and advanced materials, surged 27%.

The expansion of investment sentiment in ETFs themed around eco-friendliness and climate change is rooted in heightened awareness of abnormal climate and the deepening energy security crisis. As the world suffers from droughts and heavy rains due to abnormal weather, the importance of energy security has become a major issue. Even domestically, the negative impacts of climate change are felt firsthand. After a prolonged heatwave, Seoul recently experienced over 380mm of rainfall?the heaviest in 105 years?causing significant damage. Far away in Europe, record-breaking heatwaves and low precipitation have resulted in the worst drought in 500 years. On top of this, Russia’s ‘weaponization of natural gas’ has worsened the situation. Climate experts warn that the fundamental cause, global warming, could further exacerbate conditions, so investments to secure energy security in major countries are expected to accelerate.

The passage of the U.S. Inflation Reduction Act also supports the upward trend of eco-friendly ETFs. The main point of the Inflation Reduction Act is to reduce the fiscal deficit and curb inflation by expanding spending ($369 billion) on climate change response investments and energy security. Key climate-related measures include expanding tax credits for solar panels, wind turbines, batteries, and improving energy efficiency in all homes. Researcher Seungdoo Na from SK Securities analyzed, "The Inflation Reduction Act has ignited the growth of green energy."

From an investment perspective, ETFs representing eco-friendly investments can be categorized by sectors such as secondary batteries, renewable energy, water resources, and solar power. Among secondary battery-related ETFs, the ‘GLOBAL X LITHIUM & BATTERY ETF’ is worth noting. This ETF rose more than 26% in one month, with major holdings including U.S. lithium producer Albemarle (12%), Chinese battery cell manufacturer Eve Energy (5.6%), LG Chem (5.4%), BYD (5.3%), Japanese electronics manufacturer TDK (5%), and Gangbong Lithium (4.7%).

As drought continues due to heatwaves, interest in companies related to water treatment, purification, and water infrastructure is also growing. The ‘INVESCO WATER RESOURCES ETF’ rose over 17% in one month. Major holdings include water technology company Xylem (8%), life sciences platform company Danaher Corporation (8%), water and energy company Ecolab (7.6%), and American Water Works (7.5%). The ‘Invesco Solar ETF,’ which gathers solar-related companies, showed a rise of about 24%. Researcher Insik Kim from IBK Investment & Securities advised, "The sector expected to receive the greatest policy support in the U.S. is renewable energy. Especially considering the activation of the Defense Production Act (DPA) to expand solar panel production, it is advisable to increase interest in solar power."

This content was produced with the assistance of AI translation services.