How the Midstream is Positioned in Energy Transition

“When we first looked at midstream and ESG back in 2019, there were about nine or so companies that had ESG or sustainability reports in place, and nobody had net-zero emission targets,” Stacey Morris, director of research at Alerian, said during today’s livecast hosted by ETF Trends and ETF Database. Fast forward three years to today, Morris said that almost every midstream company has a sustainability or ESG report in place, something that has become table stakes for the industry. 

“Now a number of companies across the universe have net-zero emission targets by 2050,” Morris added. “Over 30% of our Alerian Midstream Energy Select Index (AMEI) by weighting has a net-zero emissions target.”

Morris expects this percentage to continue to grow considering that significant progress has been made in terms of improved reporting, transparency, and actually reducing emissions.

“The world is focused on reducing carbon emissions, but I think what investors need to know is that midstream has an important role to play in this,” Morris said. “The ability to store new energy and do that safely is going to be an asset through this energy transition. What we’ve seen is that a number of companies are looking to partner with midstream players and take advantage of that expertise as we move through the energy transition.”

Paul Baiocchi, chief ETF strategist at SS&C ALPS Advisors, said that the expertise that midstream companies have in building networks of pipelines and storage and processing facilities are fungible to emerging renewable energy initiatives and climate change-oriented initiatives. 

“You’ve got the implementation of hydrogen that’ll take place at scale once it’s proven to be economical, and a pipeline that currently moves natural gas or crude oil could, in theory, move hydrogen around the country. Companies have talked about how they can do that with minimal blending but also at a high level,” Baiocchi said.

“If your expertise is infrastructure designed to move to transport and process molecules, it doesn’t have to be crude oil or natural gas. It can be applied in any number of ways, and the reality is, is there’s companies out there who are looking for partners with expertise in this category, and these companies are stepping up to the plate to provide it," Baiocchi continued. 

Investors looking to bolster their portfolios and tap into midstream’s growth opportunities in the energy transition should consider the Alerian Energy Infrastructure ETF (ENFR ) and the Alerian MLP ETF (AMLP A).

For more news, information, and strategy, visit the Energy Infrastructure Channel.