Investing in Battery Technology
Invest in battery technology
As the world is shifting away from carbon-based energy toward renewable energy, new investment opportunities are emerging alongside advancements in battery technology. The electric vehicle (EV) revolution is a key part of this energy transition, igniting significant investor interest in the metals that make the production of so-called lithium-ion batteries possible. Lithium-ion (Li-ion) batteries are used in many products such as electronics, toys, wireless headphones, handheld power tools, small and large appliances, electric vehicles and electrical energy storage systems. To invest in battery technology is a way to support the green transition, and adding a battery investment to a portfolio can have multiple benefits.
How to pursue a battery investment strategy
There are several metals that are crucial for the production of electric vehicle batteries and that are likely to benefit from a structural shift in demand, hence providing a strong investment case for years to come. Pursuing an investment strategy that invests in battery technology through these metals could be very lucrative in the longer term.
The metals related to EV battery production are lithium, cobalt, graphite, vanadium and manganese. By investing in companies mining these metals, the investor gets the exposure required to benefit from the surging global demand for lithium-ion batteries. Below are examples of companies active in mining the metals that are crucial for EV-battery production.
Lithium: The metal has seen a skyrocketing popularity in recent years due to its role in lithium-ion batteries. China is a rising force in lithium production, but the most accessible investment opportunities lies within dominant players outside of Asia, most notably mining powerhouses such as Sociedad Química y Minera and Albemarle.
Cobalt: Cobalt, which is mostly mined as a by-product of copper and nickel, has also risen in popularity lately due to its role in lithium-ion batteries. Among major mining companies active in cobalt are Glencore, China Molybdenum, Fleurette Group and Vale.
Graphite: As the only non-metal element that is a good conductor of electricity, it can be used in lithium-ion batteries, as well as in nuclear reactors and the refractory and steel industries. Most of the graphite mining companies are in China and often privately owned or only listed on Asian exchanges making it difficult for investors to access. There are however some Canadian graphite exploration companies to consider such as South Star Battery Metals, Gratomic, and Graphite One.
Vanadium: vanadium redox batteries are currently generating excitement because they are reusable over semi-infinite cycles, and do not degrade for at least 20 years, allowing energy storage systems the ability to bank renewable energy. However, these batteries are quite large compared to lithium-ion batteries, and are better suited for industrial or commercial use than for use in electric vehicles. Vanadium mining companies include Largo, Australian Vanadium and Energy Fuels.
Manganese: Manganese contributes to certain lithium-ion battery chemistries, such as lithium-manganese oxide batteries. As such, hopes are high that demand for the commodity will rise in line with others that contribute to new energy sources. Major mining companies that have some exposure to manganese include: South32, Eramet and Anglo American.
Investing in areas such as battery technology also comes with a responsibility since metals mining has a significant impact on our environment. Since certain metals are needed for the green transformation, it is important that the mining companies are working in a sustainable way. Trending topics within this area are socially responsible investing and esg investment funds, which can help to promote change within the mining sector. Examples of funds that promote change with regards to ESG are AuAg Silver Bullet, AuAg Precious Green, and AuAg ESG Gold Mining ETF.
Benefits of investing in battery technology
There are multiple benefits, but also risks involved, with investing in battery technology.
Some of the benefits are:
The investor gets exposure to a strong underlying trend benefiting from the sustainable investment theme.
Battery investments will be a crucial part of the transition from fossil fuels to renewable energy sources, hence making it an important investment supporting the green transition.
More investments towards this area will speed up the development of battery technology, and hence enable the transformation to a green world.
Some of the risks involved are:
The risk of investing in the wrong company, or technology. New technology is always risky, and investing in the wrong company can result in losing money.
There is also a market risk with investing, which means that the market overall can go up and down as a result of the current market conditions.
How to invest in battery technology
- Investing in electric vehicle stocks: by buying into stocks such as Tesla, Nio, Xpeng and other related EV stocks, the investor gets direct exposure to the rise of the EV industry.
- Invest in battery technology through EV battery stocks: by investing in companies that are producers of EV batteries, the investor gets direct exposure to the battery technology needed for the EV industry.
- Investing in mining companies: Investing in mining companies that extract the metals needed for EV battery production, however these are however often listed in China and privately owned, making it difficult to invest in battery technology.
- Invest in battery technology via derviatives of metals prices: For some of the metals needed for EV batteries, such as lithium, there are future contracts traded on global exchanges, providing the investor an opportunity to speculate in a rising price for the metal.
- Metal mining funds: provides a broad exposure to companies in the mining sector that extract the metals needed for EV battery production.
- Invest in battery technology through green tech funds: provides a broad exposure to green technology stocks.
- ETFs: there are sector-focused exchange traded funds offering efficient exposure to mining or green tech companies benefiting from the rise in demand for EV batteries.
Why make a battery investment with AuAg funds?
AuAg Fonder offers funds that focus on providing exposure to precious metals and elements green tech elements. What they have in common is that these elements offer protection against monetary inflation and are necessary in the transition to a green economy – trends that are highly topical today.
By investing in battery technology via AuAg Funds, the investor gets exposure to the metals needed for electric vehicle batteries – a central part of the green energy transition.
AuAg's funds fit well into a portfolio of traditional assets as they have low correlation with equities in particular.
AuAg offers exposure to green technology companies through the fund AuAg Precious Green. The fund has 60 percent of the fund’s exposure to green tech companies divided into four sub-strategies; production of clean energy, reduced energy consumption, energy storage/power and extraction of the elements needed for the green transition. Within the energy storage/power strategy, the fund gives exposure towards companies that create batteries. And the sub-strategy focused on extraction of the elements needed for GreenTech solutions includes the companies that extract the metals needed for batteries. AuAg Precious Green is an alternative for investors that want exposure towards a battery investment.