Hydrogen Basket

Sustainable opportunities: Bank on hydrogen specialists in a diversified way


PERLES on the Hydrogen Basket

Decarbonization: Struggle against climate change

At the end of 2019, the European Union (EU) introduced its Green Deal. If the EU Commission has its way, Europe will be climate-neutral by 2050. The focus of the plan is on what is called decarbonization, which is a drastic reduction of carbon emissions. The struggle against climate-changing CO₂ is not only taking place on the old continent but worldwide. Hydrogen is regarded as a core building block of the energy transition. No element is as common in the universe as this colorless, odorless gas. Electricity can be produced with hydrogen without creating carbon dioxide. If hydrogen is separated using renewable sources of energy, the entire production chain remains carbon-neutral. This finding is not new, but there have been repeated setbacks with developing and distributing hydrogen.

Hydrogen: The race to catch up is on

Currently, hydrogen has a clear cost disadvantage compared to fossil fuels such as diesel or natural gas. According to UBS CIO GWM, government incentives combined with CO₂ taxes could, however, ensure that production picks up speed. This evaluation is in line with a study published by the Hydrogen Council at the beginning of 2020. Together with the consulting company McKinsey & Company, the Hydrogen Council examined 40 technologies in 35 different applications. The range of applications extends from road transportation to air traffic to building heating. All in all, the authors came to the conclusion that costs for a wide variety of fields of application for hydrogen could fall up to 50 percent in this decade. In this way, hydrogen would reach the competitiveness of other climate-friendly options and in some cases the competitiveness of conventional options.(Source: Hydrogen Council, „Path to hydrogen competitiveness A cost perspective“, 20.01.2020) 

Case study: Migros drives with hydrogen

Soon the efforts of industrials to have clean logistics on Swiss roads will be observable. In March 2020, Hyundai would like to deliver its first “Xcient” in Switzerland. This truck is equipped with two 95 KW fuel cells, fills up with almost 35 kilograms of hydrogen and has a range of more than 400 kilometers. It can drive much further than currently available heavy trucks with a battery-powered drive. A two-megawatt electrolysis system set up in Gösgen provided the hydrogen for the innovative trucks. This 18-ton truck is first being used by members of the “H2 Mobility Switzerland” Association. Some of the members of the association are the retailer Migros and the dairy company Emmi. By 2025, Hyundai would like to put up to 1,600 “Xcients” on the road in Switzerland. This year similar projects are supposed to start in two other European countries. (Quelle: Thomson Reuters, media report, 28.02.2020)

Investment idea: Selected hydrogen shares

Because of the outlined forecasts and specific plans, it is no surprise that the subject of hydrogen is playing an increasingly important role on exchanges as well. Investors now highly desire equities related to this forward-looking topic. However, even for specialists, there can be disappointments and price setbacks since this market is in an early stage. Overall, a diversified approach to this investment subject seems appropriate. That is right where UBS is providing an ample solution with the new Hydrogen Basket. This selection includes 13 companies that are initially weighted equally. Among these companies are the industrial gas companies Air Liquide and Linde. The latter has a stake in Hydrospider AG which operates the electrolysis plant in Gösgen. (Source: hydrospider.ch, 04.03.2020) While the two large caps have a broad operative base, the Canadian company Ballard Power Systems focuses on producing fuel cells. NEL is another genuine "Pure Play" basket member. The Norwegian company offers technical solutions for production, storage and distribution of hydrogen based on renewable resources.

The product solution

Investors can include the Hydrogen Basket in their portfolio by using UBS PERLES. This gives them select, diversified access to this promising, highly current investment subject. With a duration of seven years, a classic buy and hold approach is just as possible as a rather short-term positioning. The net proceeds of any dividend payments from any company included in the basket are reinvested in that company’s equities.


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