With concrete steps towards a globally-supported climate change initiative finally materializing, many investors have been considering the addition of a “green energy ETF” to their portfolios, speculating that mandates to reduce emissions will funnel investment dollars towards alternative energy technologies. Wind and solar power ETFs have seen significant cash inflows and jumps in price over the last year, as a positive regulatory environment offers potential for a major boost to these still developing sectors of the energy market.
But the potential beneficiaries of an increased focus on clean energy initiatives go far beyond wind and solar energy. Nuclear energy gets a bad rap in many circles, but may be a key component of plans by developed nations to reduce emissions levels and oil dependence.
Despite some negative connotations, nuclear power is, in many respects, extremely environmentally-friendly. It doesn’t pollute the air, reduces carbon emissions, and actually has a rather impressive safety record.
There is some debate over the damage done by radioactive waste. Proponents of nuclear energy claim it can be stored safely underground, while critics believe that storage for extended periods of time may be extremely dangerous.
Nuclear power is big business, with hundreds of publicly-traded companies around the world engaged in various aspects of power production. Beyond the operation of power plants, companies engaged in uranium mining, storage, and enrichment could see big increases in demand for their activity if nuclear power is a central component of further regulation.
Debate over any cap-and-trade program is expected to be heated, with several sides weighing in on various pros and cons with such a program. But nuclear power may actually be something upon which Democrats and Republicans can agree. “We need to build 100 nuclear power plants in the next 20 years,” said Senator John McCain earlier this year. “We have to, otherwise we’re not going to reduce greenhouse gas emissions.”
Senators Lindsey Graham, John Kerry, and Joe Lieberman are currently working on a plan “that would blend emissions caps with expanded offshore oil-and-gas drilling and greater federal backing for nuclear power,” writes Ben Geman.
The global nuclear power industry could get a boost from beyond the U.S. as well. Britain’s government is considering tax breaks for the industry that could lead to the generation of new reactors and give nuclear power the same beneficial treatment already enjoyed by other low-carbon electricity sources.
Nuclear Power ETFs: Options Aplenty
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For investors looking to add exposure to the nuclear power industry to their portfolios, there are a number of options. ETFs from Van Eck, PowerShares, and iShares offer similar exposure to the global nuclear power industry, but these ETFs are far from identical. Differences in country allocations, depth of holdings, expense ratios, and specific sub-sectors targeted vary across these ETF options (for more head-to-head comparisons, sign up for our free ETF newsletter).
- Market Vectors Nuclear Energy ETF (NLR): This ETF includes holdings in uranium miners, nuclear generation firms, and plant infrastructure companies. Of the ETFs profiled here, NLR is the largest with over $150 million in assets and average daily volume of almost 50,000 shares.
- PowerShares Global Nuclear Portfolio (PKN): This ETF offers considerable depth of exposure, holding more than twice the number of individual securities as NLR and NUCL. PKN is based on the WNA Nuclear Energy Index, a rules-based benchmark composed of holdings in the nuclear energy industry with representation across reactors, utilities, construction, technology, equipment, service providers and fuels.
- iShares S&P Global Nuclear Energy Index Fund (NUCL): For cost-conscious investors, NUCL offers the cheapest ETF option for gaining exposure to the global nuclear energy industry, charging an expense ratio of just 48 basis points. Major country allocations for NUCL include the U.S. (31%), Japan (15%), Canada (13%), and France (10%).
Disclosure: No positions at time of writing.