Horizons ETFs powers future energy investing

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Recent global events have pushed the need for alternative energy to the fore, and Horizons ETFs is ready to help investors meet that rising demand

THE WORLD is facing a huge challenge, and Horizons ETFs is ready to help investors address it. “Over the last decade, we’ve seen a reordering of the traditional energy investment thesis. More and more countries are setting aggressive goals to reduce emissions in an effort to mitigate climate change. Meanwhile, the Russian invasion of Ukraine is resulting in significant fossil fuel deficiencies throughout Europe and will affect Asia to some degree,” says Steve Hawkins, president and CEO of Horizons ETFs.

Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange-traded funds (ETFs) in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions allowing investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has close to $22 billion of assets under management and 105 ETFs listed on major Canadian stock exchanges.

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“If we’re going to achieve a low-carbon future, the use of alternatives like nuclear and hydrogen to displace fossil fuels will be a necessity. Adoption of these alternative energies could increase exponentially over the next decade”

Steve Hawkins, Horizons ETFs

“Crude oil and natural gas are already great Canadian commodity exports, but the world is really moving away from fossil fuels, and alternate energy is becoming an increasingly important consideration in the broader marketplace. A significant amount of the world is still dependent on these fossil fuels, so how do we close the gap on global energy deficiencies when fossil fuels make up nearly half the power generation in the world?” “We need more nuclear energy, more wind energy, and more solar energy. We also need to look at other fuel sources, like hydrogen,” he says. He also notes that electric vehicles are gaining in popularity, and, with them, there is growing demand for lithium for battery manufacturing. Horizons ETFs has several funds exposed to crude oil and natural gas futures, but Hawkins doesn’t consider them long-term, strategic growth investments. They’re not like the funds they’ve rolled out with underlying themes offering alternative energy opportunities with very low carbon fuel sources. “We look at investing in lithium, uranium, and hydrogen technology, and carbon credits, as long-term growth strategies,” said Hawkins, “These are critical, disruptive asset classes that are benefiting from those long-term decarbonization trends.”

Over the last few years, Horizons ETFs has introduced three mandates designed to offer investors exposure to growing alternative energy trends. The first was the Horizons Global Uranium Index ETF (HURA), Canada’s first ETF to provide exposure to companies involved in uranium mining and exploration, as well as the physical price of uranium. In 2021, Horizons ETFs launched Horizons Global Lithium Producers Index ETF (HLIT) and the Horizons Global Hydrogen Index ETF (HYDR), two more Canadian firsts for exposure to innovative alt-energy commodities. Lithium is key for batteries, smartphones, and electric vehicles. Demand for lithium is expected to increase by approximately 400 percent between 2020 and 2030. Hydrogen is also expected to be a transformative energy

source in the replacement of fossil fuels, as its in-use consumption does not produce carbon emissions as a by-product. Currently, hydrogen fuel cells are used for commercial vehicles and in industries in which it’s difficult to decarbonize – such as rail and ship transport. Uranium stocks have been enjoying a renaissance in the last two years, and Hawkins expects that to continue as the demand for nuclear energy keeps rising. China plans to spend $450 billion on building 150 reactors in the next five years.2 The US administration has earmarked money to maintain its existing nuclear plants and create new ones, which is important, since several states still depend on coal. Given that current fossil fuel supply-side issues and a hunger for more energy as the world reopens post-pandemic are creating huge demand, Hawkins says, “we think people should consider investing in these underlying commodities and technologies, which are really going to be at the forefront of the global energy market in the near and long-term future.”

Horizons’ opportunities “If we’re going to achieve a low-carbon future, the use of alternatives like nuclear and hydrogen to displace fossil fuels will be a necessity. With the investments being made right now across the world, adoption of these alternative energy sources could increase exponentially over the next five to 10 years,” Hawkins observes. “We continue to look at new opportunities in the commodities space on an overall basis,” he says. Traditional metals like copper, nickel, and lithium are critical to the production of solar, wind, and hydrogen-based technologies. Zinc and gold are key to future advanced electronics manufacturing as well. Other base metals, many of which are used in semiconductors, could also show some interesting trends and long-term growth possibilities. Hawkins says that Horizons identifies disruptive macro-level trends while seeking high-conviction themes. It examines them from a long-term growth, focus, and strategy perspective, and is interested in investment narratives unconstrained by geographies and sectors. The firm is also interested in a broader universe of investment ideas rather than specific technologies that affect people’s daily lives.

“Everybody’s talking about moving away from the use of fossil fuels.… That’s why this need for carbon credits – because we know we can’t get away from the use of fossil fuels any time soon”

Steve Hawkins, Horizons ETFs

Carbon credits on the rise Hawkins notes that carbon credits have exploded in the past three to four years with the global movement to reduce carbon emissions and aid the environment. In 2005, the European Union placed a price on carbon emissions and introduced the world’s first, and largest, international emissions trading system in an effort to reduce the EU’s overall emissions. In 2022, Horizons ETFs introduced Canada’s first carbon credits ETF, Horizons Carbon Credits ETF, giving investors exposure to carbon credits through futures contracts or derivative instruments. Carbon credits have become a popular asset class in recent years as demand outstrips supply.

“Governments across the world are talking about moving away from the use of fossil fuels in everything they do,” says Hawkins. “That’s why I think the investment case for carbon credits is strong – because we know these energy installations can’t get away from their use of fossil fuels any time soon. With fewer and fewer carbon credits being made available every year, these are all very long-term sustainable trends from an investment perspective.” Hawkins is encouraging advisors to “get ahead of the curve” and invest in a basket of companies through ETFs, rather than just the leading one, so they can work from a strategic perspective and gain diversified exposure to up-and-coming, but long-term focused, growth trends. “We want to take the guesswork out of picking names in these emerging opportunities,” he says, “and offer investors an easier way to access these long-term growth opportunities now – before the future arrives.”

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1 cm

size of uranium fuel pellet producing the energy of 1 ton of coal/149 gallons of oil

number of reactors currently being constructed in Asia*

71.52%

return of Horizons Global Uranium Index ETF (HURA) in 2021

50%

percentage of vehicles that will be electric by 2030**

US$17,000

price per tonne of lithium, up from US$8,000 over 2021***

Sources: *globalxetfs.com ** canalys.com ***https://pubs.usgs.gov/periodicals/mcs2022/mcs2022-lithium.pdf

Sources: *ec.europa.eu **etfdb.com

the European Union Allowance Futures’ return in 2021**

138%

participants across Europe in the EU's Emissions Trading System*

10,000+

1 carbon credit equals 1 ton of carbon emissions

1=1

Europe showing us the way

Commissions, management fees, and expenses all may be associated with an investment in exchange-traded products (the "Horizons Exchange Traded Products") managed by Horizons ETFs Management (Canada) Inc. The Horizons Exchange Traded Products are not guaranteed, their values change frequently, and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing. The indicated rates of return are the historical annual compounded total returns, including changes in per-unit value and reinvestment of all distributions, and do not take into account sales, redemption, distribution, or optional charges, or income taxes payable by any security holder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF(s) or future returns on investment in the ETF(s). Only the returns for periods of one year or greater are annualized returns. The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions, and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors. Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law. The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG.  Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG regarding any investment in this financial instrument.

Horizons ETFs has several funds exposed to crude oil and natural gas futures, but Hawkins doesn’t consider them long-term, strategic growth investments. They’re not like the funds they’ve rolled out with underlying themes offering alternative energy opportunities with very low carbon fuel sources. “We look at investing in lithium, uranium, and hydrogen technology, and carbon credits, as long-term growth strategies,” said Hawkins, “These are critical, disruptive asset classes that are benefiting from those long-term decarbonization trends.”