First Hydrogen Energy ETF Debuts

Defiance ETFs breaks new ground with the first ETF to target hydrogen-based energy.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

Today, Defiance ETFs launched the first ETF to aim to capture the performance of companies involved in the hydrogen-based energy industry. The Defiance Next Gen H2 ETF (HDRO) focuses mainly on pure-play companies generating half or more of their revenues from the hydrogen-based energy and fuel cell space, which is still in a relatively early stage of development.

The fund comes with an expense ratio of 0.30%.

Hydrogen As A Fuel
Defiance ETFs’ Chief Investment Officer Sylvia Jablonski notes that Bank of America has estimated that, by 2050, the hydrogen fuel market will have $11 trillion in investments, and will generate $2.5 trillion in direct revenues. It’s currently worth around $150 billion, she says.

“Hydrogen has the potential to be an entirely green fuel,” Jablonski said, noting that the main byproduct of the process is simply water.    

One of the largest problems around hydrogen-based energy, however, is storage, necessitating research into fuel cell development and innovation, Jablonski adds.

“The technology, the economics and the political environment are all basically in favor of hydrogen as a fuel source,” she said. “If the challenge of safe and effective storage is resolved, as that becomes more efficient, that will create some economies of scale.”

Methodology

HDRO’s underlying index, the BlueStar Hydrogen & NextGen Fuel Cell Index, can include up to a 15% weight in companies that are not pure plays, though it does not include vehicle manufacturers. To be eligible, companies must meet size and liquidity requirements, and can be drawn from developed as well as developing markets, the prospectus says.

The underlying index uses a modified market capitalization weighting approach with its 25 securities, and reconstitutes on a quarterly schedule, according to the document.

The fund’s top holdings include such names as Plug Power, FuelCell Energy and Ballard Power Systems, and the United States, the United Kingdom and South Korea represent the fund’s largest country exposures.

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.