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What Does the UN Climate Change Report Mean for Hydrogen Stocks?

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Photo by HDRO

World leaders and environmentalists are still absorbing the implications of the UN's recent climate change report, but hydrogen stocks are already reacting to the call to speed up the production of green energy and limit emissions.

Climate Change can no Longer be Ignored

The report, assessing the extent and likely trajectory of climate change, has been described as a "code red for humanity". According to the Intergovernmental Panel on Climate Change, despite existing commitments to limit global warming to 1.5℃ above previous levels, the planet is almost inevitably going to exceed that temperature by 2040.

Without swift, harsh action to cut emissions and pursue carbon neutrality, and “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions,” warned the IPCC, the best-case scenario is a rise of 2.7℃ by the end of the century.

The publication of the report follows weeks of wildfires, landslides, and mass flooding in Italy, Turkey, Germany, the US, and China, much of which is still ongoing, which only heightens the relevance of the report.

But There is Hope for the Future

The report isn't entirely damning. If countries work together immediately to deliver strong and sustained drops in emissions, it predicts, air quality would improve quickly. Although global temperatures will go on rising for several decades, the planet could return to below the 1.5℃ limit by 2100.

The IPCC suggests a combined approach of replanting forests to speed up the removal of carbon dioxide in the atmosphere through natural photosynthesis, and using technology to drastically cut the emissions and pollution that will be produced in the future.

This second element in their suggested approach - applying tech to solve the climate change crisis - has investors pricking up their ears and looking towards disruptive companies like green hydrogen stocks.

Green hydrogen is Leading the Way

The report makes it clear that commitments thus far to offset carbon emissions, lower energy consumption, and limit greenhouse gas (GHG) emissions are not enough. What's needed is a cleaner, greener energy source that doesn't release carbon, and is sufficient to power transportation, industry, residential heating, and more.

Green Hydrogen Checks all these Boxes.

"Green hydrogen" means that the power for electrolyzers used to harvest the hydrogen molecules, and energy needed to transfer them to a fuel cell, comes from renewable energy sources rather than fossil fuels.

Hydrogen is abundantly available across the earth, and it doesn't produce environmentally significant emissions when combusted. It's energy dense, with a long-duration discharge cycle that allows it to store energy and release it later during times of peak demand; it's more reliable than solar or wind power; plus, it's a molecule-based fuel which means that industries - one of the biggest sources of emissions to date - can use it for feedstock.

Unlike some speculative climate change suggestions, green hydrogen is already proven. Here are a few examples of initiatives already in place from leading hydrogen stocks:

  • Plug Power recently broke ground on its fourth hydrogen refinery in Georgia, USA;

  • ITM Power PLC has built 7 hydrogen vehicle refueling stations in the UK to date, will roll out 100 more within 5 years, and is part of a consortium building a huge offshore marine hydrogen production plant in Europe;

  • FuelCell Energy runs the world's largest hydrogen fuel cell park in South Korea, providing 59 megawatts of electricity and district heating to a number of customers.

Additionally, thousands of hydrogen-powered fuel cell cars, buses, heavy trucks, and forklifts are already in use in cities around the world.

Green Hydrogen Stocks are Attracting New Investor Attention

It's not surprising that the new impetus to solve climate change and the starring role of green hydrogen stocks is directing investors towards hydrogen companies’ stock. Hydro stocks like Plug Power, Ballard Systems, Bloom Energy, and FuelCell Energy all rose over the past few days.

A hydrogen ETF like Defiance's HDRO ETF may be worth a look for investors who want to be part of green hydrogen disruption while spreading their exposure to the sector. HDRO is a relatively low-cost way to gain exposure to a range of leading hydrogen companies’ stocks to help mitigate the risk of buying a single stock. It is just one of Defiance’s suites of disruptive ETFs that offer retail and institutional investors access to the trends and technologies that could shape the future.

Important Disclosures:

Read more about HDRO here, including current holdings and performance: https://www.defianceetfs.com/hdro/. Fund holdings are subject to change and should not be considered recommendations to buy or sell any security.

The Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company. Please read carefully before investing. A hard copy of the prospectuses can be requested by calling 833.333.9383.

Investing involves risk. Principal loss is possible. As an ETF, HDRO (the “Fund”) may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. The Fund is not actively managed and would not sell a security due to current or projected under performance unless that security is removed from the Index or is required upon a reconstitution of the Index. It is not possible to invest directly in an index.

A portfolio concentrated in a single industry or country, may be subject to a higher degree of risk. Specifically, the Index (and as a result, the Fund) is expected to be concentrated in hydrogen and fuel cell companies. Such companies may depend largely on the availability of hydrogen gas, certain third-party key suppliers for components in their products, and a small number of customers for a significant portion of their business.

The Fund is considered to be non-diversified, so it may invest more of its assets in the securities of a single issuer or a smaller number of issuers. Investments in foreign securities involve certain risks including risk of loss due to foreign currency fluctuations or to political or economic instability. This risk is magnified in emerging markets. Small and mid-cap companies are subject to greater and more unpredictable price changes than securities of large-cap companies.

HDRO is new with a limited operating history.

Opinions expressed are subject to change at any time, are not guaranteed, and should not be considered investment advice.

Commissions may be charged on trades.

The Defiance ETFs are distributed by Foreside Fund Services, LLC.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

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