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Trump Exits Paris Climate Deal: ETFs to Gain & Lose

Sweta Killa

Keeping his campaign promise, the American President has taken efforts to revive the downtrodden coal industry. Donald Trump has pulled the country out of the landmark Paris climate change agreement, which was expected to bring an end to the fossil fuel era.

The agreement was signed by 195 countries in December 2015 to curb global warming to a maximum limit of two degrees Celsius with a goal of lowering it further to about 1.5 degrees as soon as possible (read: Solar Stocks Plunge as Trump Reportedly Pulls Out of Paris Climate Deal).

Trump cited that the deal would hurt the economy, cost jobs, weaken the American national sovereignty, and put the country at a permanent disadvantage to the other countries of the world. Additionally, the accord has blocked the development of clean coal in America while China, India and Europe are allowed to increase their coal production. This led coal jobs to move out of the U.S. to foreign countries, putting them at a financial advantage over the U.S.

As per National Economic Research Associates, the Paris treaty would have led to the loss of as many as 2.7 million American jobs by 2025 and is destructive to a number of vital industries by 2040. Notably, the deal would cut production by 12% in paper, 23% in cement, 38% in iron and steel, 86% in coal and 31% in natural gas. This would cost the economy a reduced GDP of $3 trillion and 6.5 million industrial job losses by 2040 while cutting household income by at least $7,000.

However, Trump calls for negotiation either to re-enter the Paris accord or to have a new agreement "on terms that are fair to the United States, its businesses, its workers, its people, its taxpayers."

Trump’s withdrawal from Paris Climate Change will hurt solar and renewable energy stocks while boost the carbon-intensive industry and dirty fuel sources like coal. Below we highlight the potential winners and losers from the Trump move (read: Will Trump Era Spell Trouble for Alternative Energy ETFs?):

ETFs to Lose

Guggenheim Solar ETF TAN

This ETF offers exposure to the global solar industry by tracking the MAC Global Solar Energy Index. Holding 30 stocks in the basket, it is highly concentrated on the top firm – First Solar (FSLR) –  at 11.4% of total assets while other firms hold less than 8.9% share. American firms dominate the fund’s portfolio at nearly 46.1%, followed by Hong Kong (27.4%) and China (10.4%). The product has amassed $217.8 million in its asset base and trades in a solid volume of more than 163,000 shares a day. It charges investors 71 bps in fees per year. The fund has gained about 12% in the year-to-date timeframe.

First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN

This fund provides exposure to U.S. clean energy companies across a wide range of industries, including solar power, biofuels, advanced batteries, as well as the installation of new technological systems. It tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $60.3 million. It charges 60 bps in fees per year while volume is light at nearly 11,000 shares. In total, the product holds 36 securities with concentration on the top firm at 10.6% while the other firms account for less than 8% share each. QCLN has returned 14.7% in the year-to-date time frame (read: ETFs to Top/Flop as Trump Lays Foundation for Future America).

PowerShares WilderHill Clean Energy Portfolio PBW

This product provides exposure to U.S. companies engaged in the business of advancement of cleaner energy and conservation. It follows the WilderHill Clean Energy Index and holds about 40 stocks in its basket with none holding more than 3.84% of the total assets. The fund has AUM of $97.8 million in its asset base and sees a good volume of nearly 123,000 shares a day. Expense ratio comes in at 0.70%. PBW has gained 13.9% so far in the year.

iShares MSCI ACWI Low Carbon Target ETF CRBN

This ETF provides investors global exposure to companies that are less dependent on fossil fuels by tracking the MSCI ACWI Low Carbon Target Index. Holding 1,234 stocks in its basket, no single security holds more than 2% of assets. American firms account for half of the portfolio while other countries like Japan, United Kingdom and China have a single-digit exposure each. CRBN has AUM of $404.2 million but trades in a light average daily volume of 11,000 shares. It charges 20 bps in fees and has gained 12.5% in the year-to-date timeframe (read: Sustainable Investing: What Is It and Why Is It Hot Now?).

ETFs to Win

VanEck Vectors Coal ETF KOL

This ETF targets the coal industry and tracks the MVIS Global Coal Index. Holding 26 securities in the basket, the fund is pretty well spread across each component with none holding more than 8.53% share. It has a Chinese focus accounting for about one-fourth of the portfolio while Australia, Indonesia and Canada round off the next three. The fund has amassed $85.1 million in its asset base and trades in average daily volume of about 155,000 shares. It charges 59 bps in annual fees and has added 4.2% so far this year.

First Trust Natural Gas ETF FCG

FCG offers exposure to U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-Revere Natural Gas Index and holds 36 stocks in its basket, which is well spread out across components with none holding more than a 6.56% share. The fund has amassed $172.9 million in its asset base while charging 60 bps in annual fees. It trades in a good volume of about 311,000 shares a day on average and has shed 18% so far this year.

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