Investing in the Green Revolution: Decarbonization and the Metals
Investing in the ISTOXX® EUROPE 600 BASIC RESOURCES GR DECREMENT 50 index can be attractive because of its link to resource management. This index groups companies in the basic resources sector in Europe, such as mining, construction materials and energy, and forestry management, which are essential for economic growth and development. By investing in this index, investors can benefit from exposure to strategic sectors where global demand for resources is constantly evolving. In addition, resource management is increasingly focused on sustainability and energy efficiency, offering investment opportunities in companies that adopt environmentally responsible practices.
According to a report from the International Energy Agency (IEA), global investments in renewable energy, particularly solar energy, are expected to surpass oil this year. Investments in solar projects and the oil industry are projected to reach $382 billion and $371 billion, respectively, in 2023. Total investments in decarbonization technologies, which require massive amounts of metals, are expected to reach $1.7 trillion this year, while fossil fuels will attract around $1 trillion.
Metals are used in many strategic sectors, and global leaders aim to achieve carbon neutrality by 2050. To achieve this, copper demand is expected to skyrocket in the following sectors:
- Automobile: Increased production of Electric Vehicles (EVs) logically leads to increased demand for copper. EVs require 2.5 times more copper than internal combustion engines. Batteries and charging stations account for 90% of the demand in this sector.
- Energy transmission and distribution: Almost all electrical wiring uses copper, representing 20% of the total demand.
- Electricity production: Green energy consumes 2 to 5 times more copper than energy produced from coal or natural gas.
Generally speaking, the demand for base metals is expected to continue exceeding available supply, leading to long-term price increases and naturally improving the profitability of companies operating in this sector.
According to the IEA's estimates in its central scenario, to achieve carbon neutrality:
- The elimination of combustion engines is accelerated, with projected sales of 40 million electric vehicles by 2030 and over 70 million by 2040. To support this, significant investments are needed to build over 200 million charging stations by 2030. This will result in a notable increase in copper consumption, which is expected to double in 15 years, from 25 million tonnes in 2021 to 49 million tonnes in 2035. Furthermore, the overall demand for essential metals is projected to increase by about 110% by 2030.
- By 2030, half of electricity production will come from renewable sources.
- The share of renewables in energy consumption is expected to triple by 2030.
Although forest management represents only a small part of the index, it remains an important component of sustainable natural resource management. By supporting this index, investors have the opportunity to contribute to forest preservation and responsible management practices, which in turn helps long-term environmental protection. In addition, investing in this index offers diversification within the European basic resources sector, while aligning its values with environmental sustainability.
Forests are renewable resources that provide a wide range of products (wood, pulp, paper) and offer numerous opportunities for exploitation while ensuring their conservation and regeneration. Companies committed to sustainable forest management can guarantee a continuous supply of these resources, making them attractive long-term investments. Economic cycles may have a less pronounced impact on the revenues of forest companies, providing diversification to any investment portfolio.
Forestry companies are not limited to raw timber; they also engage in value-added activities such as processing, manufacturing, and distribution. These companies can capture additional value along the supply chain and potentially generate higher profits.
Forests play a crucial role in combating climate change as carbon sinks and by promoting biodiversity. Investing in companies that actively promote sustainable forestry practices can contribute to environmental preservation and align with investors' environmental, social, and governance (ESG) goals.
The forestry industry is embracing technological advancements such as precision forestry, remote sensing, and digital solutions for forest management. Investing in companies at the forefront of innovation can offer potential growth opportunities and improve operational efficiency. The increasing value of forest land, technological improvements, and the adoption of sustainable practices can contribute to the appreciation in value of forest assets.
Product rationale
The ISTOXX® EUROPE 600 BASIC RESOURCES GR DECREMENT 50 (ISXPGR50) Index offers indirect exposure to the basic resources sector, particularly in metals such as copper, aluminum, zinc, and steel. Therefore, it can provide an interesting long-term growth potential as the global demand for these resources continues to grow, supported by the increasing digitisation of society, energy transition, and industrialisation and economic development in many emerging countries.
Minimum strike on 2 dates*: June 6th and October 20th
*The index is observed on 2 dates: June 6th and October 20th, and the most advantageous entry point (the lowest) is selected to calculate performance. This allows for better control of the entry point. If the index rises during this period, the level on June 6th is used; conversely, if the index declines, the level on October 20th is used.
Athena Stepdown Min Strike | Product Snapshot
For informational purposes only. Not investment advice.
Investing in the ISTOXX® EUROPE 600 BASIC RESOURCES GR DECREMENT 50 index can be attractive because of its link to resource management. This index groups companies in the basic resources sector in Europe, such as mining, construction materials and energy, and forestry management, which are essential for economic growth and development. By investing in this index, investors can benefit from exposure to strategic sectors where global demand for resources is constantly evolving. In addition, resource management is increasingly focused on sustainability and energy efficiency, offering investment opportunities in companies that adopt environmentally responsible practices.
According to a report from the International Energy Agency (IEA), global investments in renewable energy, particularly solar energy, are expected to surpass oil this year. Investments in solar projects and the oil industry are projected to reach $382 billion and $371 billion, respectively, in 2023. Total investments in decarbonization technologies, which require massive amounts of metals, are expected to reach $1.7 trillion this year, while fossil fuels will attract around $1 trillion.
Metals are used in many strategic sectors, and global leaders aim to achieve carbon neutrality by 2050. To achieve this, copper demand is expected to skyrocket in the following sectors:
- Automobile: Increased production of Electric Vehicles (EVs) logically leads to increased demand for copper. EVs require 2.5 times more copper than internal combustion engines. Batteries and charging stations account for 90% of the demand in this sector.
- Energy transmission and distribution: Almost all electrical wiring uses copper, representing 20% of the total demand.
- Electricity production: Green energy consumes 2 to 5 times more copper than energy produced from coal or natural gas.
Generally speaking, the demand for base metals is expected to continue exceeding available supply, leading to long-term price increases and naturally improving the profitability of companies operating in this sector.
According to the IEA's estimates in its central scenario, to achieve carbon neutrality:
- The elimination of combustion engines is accelerated, with projected sales of 40 million electric vehicles by 2030 and over 70 million by 2040. To support this, significant investments are needed to build over 200 million charging stations by 2030. This will result in a notable increase in copper consumption, which is expected to double in 15 years, from 25 million tonnes in 2021 to 49 million tonnes in 2035. Furthermore, the overall demand for essential metals is projected to increase by about 110% by 2030.
- By 2030, half of electricity production will come from renewable sources.
- The share of renewables in energy consumption is expected to triple by 2030.
Although forest management represents only a small part of the index, it remains an important component of sustainable natural resource management. By supporting this index, investors have the opportunity to contribute to forest preservation and responsible management practices, which in turn helps long-term environmental protection. In addition, investing in this index offers diversification within the European basic resources sector, while aligning its values with environmental sustainability.
Forests are renewable resources that provide a wide range of products (wood, pulp, paper) and offer numerous opportunities for exploitation while ensuring their conservation and regeneration. Companies committed to sustainable forest management can guarantee a continuous supply of these resources, making them attractive long-term investments. Economic cycles may have a less pronounced impact on the revenues of forest companies, providing diversification to any investment portfolio.
Forestry companies are not limited to raw timber; they also engage in value-added activities such as processing, manufacturing, and distribution. These companies can capture additional value along the supply chain and potentially generate higher profits.
Forests play a crucial role in combating climate change as carbon sinks and by promoting biodiversity. Investing in companies that actively promote sustainable forestry practices can contribute to environmental preservation and align with investors' environmental, social, and governance (ESG) goals.
The forestry industry is embracing technological advancements such as precision forestry, remote sensing, and digital solutions for forest management. Investing in companies at the forefront of innovation can offer potential growth opportunities and improve operational efficiency. The increasing value of forest land, technological improvements, and the adoption of sustainable practices can contribute to the appreciation in value of forest assets.
Product rationale
The ISTOXX® EUROPE 600 BASIC RESOURCES GR DECREMENT 50 (ISXPGR50) Index offers indirect exposure to the basic resources sector, particularly in metals such as copper, aluminum, zinc, and steel. Therefore, it can provide an interesting long-term growth potential as the global demand for these resources continues to grow, supported by the increasing digitisation of society, energy transition, and industrialisation and economic development in many emerging countries.
Minimum strike on 2 dates*: June 6th and October 20th
*The index is observed on 2 dates: June 6th and October 20th, and the most advantageous entry point (the lowest) is selected to calculate performance. This allows for better control of the entry point. If the index rises during this period, the level on June 6th is used; conversely, if the index declines, the level on October 20th is used.
Athena Stepdown Min Strike | Product Snapshot
For informational purposes only. Not investment advice.