Green investments rally ahead of potential 'blue wave' election

As Democratic challenger Joe Biden gains momentum in the polls over President Donald Trump, certain investment strategies expected to benefit from a more liberal administration are gaining appeal among investors.

Among exchange-traded funds targeting specific sectors and industries, Invesco Solar ETF (TAN) has become one of the hottest funds of 2020, up more than 143% from the start of the year.

The ETF, which holds a concentrated portfolio of solar energy companies, is coming off an impressive 66.5% gain last year. But the recent appeal is viewed as directly linked to a potential Biden victory.

According to CFRA, the ETF has $2 billion in assets, up from $1.6 billion a month ago and $630 million in June.

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Todd Rosenbluth, director of mutual fund and ETF research at CFRA, said investors are betting that “if the Biden administration comes in, their efforts to return the U.S. to the Paris climate accord and a focus on fighting climate change will be a driver for wind, solar and alternative energy demand.”

Other examples of thematic ETFs rallying this year include iShares Global Clean Energy (ICLN), Invesco WilderHill Clean Energy (PBW), ALPS Clean Energy (ACES) and SPDR Kensho Clean Power (CNRG).

ICLN, which is up more than 80% this year and gained nearly 45% last year, has grown to $2 billion from $1.5 billion a month ago and $721 million in June.

PBW, which is up 102% this year following a 63% gain last year, has grown to $933 million from $761 million a month ago and $367 million in June.

One of the newer funds, ACES, is up more than 80% this year after gaining 52% during its first full year in 2019. At $435 million, its assets are up slightly from a month ago and more than double where they were in June.

And CNRG, on the smaller end with just with just $75 million, is up 78% this year and gained 63% last year. CNRG assets have also more than doubled since June.

The asset growth is a combination of market performance and growing investor appetite, which is often fueled by market performance.

“Investors have looked to get in front of this long-term trend,” Rosenbluth said. “The ETFs’ performance in the past month in particular is consistent with Biden’s improved electability chances.”

 With the election less than four weeks away and Biden leading in most major polls, investors are starting to position portfolios for an administration that will likely throw fiscal and policy support behind more environmental causes.

“The infrastructure and green trade is a very ‘blue wave’ concept,” said Yousef Abbasi, global market strategist at StoneX, referring to a situation in which the Democrats take control of both the White House and Congress. “The trade is very much indicating that someone believes that we’ll get the push for a Democratic Senate.”

Bloomberg News contributed to this report.