All About Hydrogen ETFs: Analysis, Comparison, and Outlook

Are you looking to give meaning to your savings by investing in the energy transition? Have you heard about hydrogen as the fuel of the future, a key solution to decarbonize our economy, but find the path to investing in it complex? How can you capture the potential of this booming market without having to analyze dozens of companies one by one? And above all, how can you ensure an informed choice aligned with your financial and environmental objectives?

Thematic investing through index funds, or ETFs, dedicated to hydrogen might well be the answer. These financial instruments allow you to gain diversified exposure to the entire hydrogen value chain, from gas producers to fuel cell manufacturers. But with a growing offer, how do you navigate and select the most relevant product? This is what we will explore together.

Understanding Hydrogen ETFs: a gateway to the energy of tomorrow

An ETF (Exchange-Traded Fund), also called a tracker or index fund, is an investment fund traded on the stock market, just like a share. Its particularity is that it does not seek to "beat the market" through active management, but to replicate as faithfully as possible the performance of a reference index. Imagine it as a diversified basket containing all the shares of an index (such as the CAC 40) or, in our case, companies from a specific sector. By buying a single share of this ETF, you simultaneously invest in all the companies in the basket, which greatly simplifies diversification.

A hydrogen ETF applies this principle to the hydrogen sector. It groups shares of global companies operating at various stages of the value chain: hydrogen production (notably green hydrogen by electrolysis), fuel cell development, storage, distribution, and integration of hydrogen technologies in industry or transportation. It is a simple and effective way to bet on the overall growth of this megatrend, considered a pillar in the fight against climate change. Indeed, hydrogen produced from renewable energy ("green hydrogen") offers an energy storage solution and a clean fuel whose combustion produces only water, thus actively contributing to decarbonization.

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Why invest in a hydrogen index fund?

Investing in a theme as specific as hydrogen may seem risky, but ETFs offer a structured approach that presents significant advantages while remaining aware of the challenges inherent to an emerging market.

Advantages: diversification and growth potential

The main strength of a hydrogen tracker is instant diversification. The sector is young, volatile, and composed of many companies, from industrial giants to innovative startups. Betting on a single company carries considerable risk. An ETF spreads this risk across dozens of players, smoothing performance and protecting you from the potential bankruptcy of a single company. You do not put all your eggs in one basket but bet on the ecosystem’s overall growth.

Then, the growth potential is considerable. Hydrogen is at the core of many governments’ and companies’ ecological transition strategies. Recovery plans and public subsidies multiply to accelerate the deployment of this technology, whether for heavy transport (trucks, ships), the steel industry, or storing surplus renewable electricity. Investing via an ETF positions you to benefit from this underlying momentum over the long term.

Risks and challenges in the sector

It is crucial to stay realistic: hydrogen is a sector of the future, but its economy is not yet mature. Investment therefore carries risks. The market is marked by high volatility as company valuations are often based on future revenue promises rather than current earnings. Research and development costs are high, and large-scale profitability remains a major challenge.

Moreover, technological obstacles persist. Electrolysis efficiency (the process producing green hydrogen) must still improve to make this energy competitive. The storage and distribution of hydrogen, a very light gas, also pose logistical and safety challenges. Finally, it is essential to remember that hydrogen is only "green" if the electricity used for its production is itself decarbonized. Dependence on renewable energies is therefore total for its climate impact to be positive.

Overview of key hydrogen ETFs available in Europe

The European market offers a handful of ETFs dedicated to the hydrogen economy. Although they target the same theme, their strategies, compositions, and therefore their performances can vary considerably. Here is a comparison of the main players to help you see more clearly.

L&G Hydrogen Economy UCITS ETF (IE00BMYDM794)

This is one of the largest ETFs in the sector in terms of size, which is often a guarantee of liquidity. It replicates the Solactive Hydrogen Economy index, which selects companies active throughout the value chain: hydrogen producers, technology manufacturers (electrolysers, fuel cells), and integrators. Its diversification makes it a good entry point for broad sector exposure.

Amundi Global Hydrogen ESG Screened UCITS ETF (FR0010930644)

This ETF stands out by notable outperformance in recent years. Its index, designed by Amundi, focuses on global leaders benefiting from public support and strong demand. It integrates an ESG (Environmental, Social, and Governance) filter, meaning it excludes companies less virtuous on these criteria. It emphasizes green hydrogen producers, fuel cell manufacturers, and infrastructure developers.

VanEck Hydrogen Economy UCITS ETF (IE00BMDH1538)

Replicating the MVIS Global Hydrogen Economy index, this fund offers very broad exposure, including major players in America, Europe, and Asia. It covers green and blue hydrogen producers, infrastructure specialists, and advanced technology manufacturers. Its past performance has been more challenging, reflecting exposure to very volatile and still immature companies, which could however offer rebound potential for very patient investors.

BNP Paribas Easy ECPI Global ESG Hydrogen Economy UCITS ETF (LU2365458145)

This fund stands out with two advantages: among the lowest management fees on the market (0.31%) and a rigorous ESG filter via the ECPI index. It focuses on companies meeting high sustainability standards while positioned on renewable hydrogen production, technology development, and infrastructure. Its recent performance has shown some resilience, illustrating investors’ interest in actors most aligned with sustainability goals.

Performance analysis: what do the numbers tell us?

Analyzing past performance is instructive but must be done cautiously. They in no way predict future returns and mainly reflect the volatility of a developing sector. Strong disparities between ETFs are mainly explained by the composition of their underlying indices.

Here is an overview of performance (note that data may vary depending on sources and reporting dates):

How to choose the best hydrogen ETF for your portfolio?

The selection of the "best" ETF depends on your investor profile, risk sensitivity, and convictions. Here are the key criteria to examine for an informed choice.

Essential criteria to examine

1. Fees (TER - Total Expense Ratio): This is the annual percentage fee deducted from your investment to cover the fund’s management costs. They vary here from 0.31% to 0.60%. All else equal, a lower TER is always preferable because fees eat into your long-term returns.
2. Fund size (assets under management): A fund with large assets (e.g., > 100 M€) is often more liquid, meaning it is easier to buy and sell shares at a price close to their real value. A very small fund may be more subject to price gaps or even risk closure.
3. Index strategy and diversification: This is the core of the analysis.
      - Pure-players or industrial giants? Does the index target companies 100% dedicated to hydrogen (riskier) or conglomerates for whom hydrogen is only part of their activity (more stable)?
      - ESG filter? If responsible investment is a priority for you, favor ETFs such as those from Amundi or BNP Paribas applying an ESG filter.
      - Geographic diversification: Is the index concentrated on one region (USA, Europe) or is it global?
4. Replication method: All ETFs presented here use full physical replication. This means they actually hold in their portfolio all shares of the index they track. It is the simplest and most transparent method.
5. Eligibility for tax wrappers: To date, no hydrogen ETF is eligible for the PEA (French equity savings plan). Indeed, the PEA is reserved for European shares, while these ETFs invest globally. You will therefore need to hold them in a regular securities account or a life insurance policy (if the insurer offers them as units of account).

Beyond ETFs: diversifying your impact for the ecological transition

Investing in a hydrogen ETF is an excellent way to support companies building the decarbonized economy of tomorrow. It is a powerful lever but represents an indirect impact: you finance actors who in turn will deploy solutions. But is there a way to have a more direct, measurable impact on the climate trajectory?

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This is precisely the mission we set ourselves at Homaio. We believe finance must offer tools to act concretely on CO2 emissions. That is why we have made accessible a lever formerly reserved for experts: investing in carbon quotas. The principle is simple: by buying tons of CO2 on regulated markets, we remove them from circulation. Each quota purchased by our investors is a quota that industrial polluters will never be able to use.

This approach complements investment in ETFs.

• Hydrogen ETFs support the creation of solutions for the future.
• carbon quota investments increase the cost of pollution today, encouraging companies to accelerate their transition to those same solutions.

By combining these two strategies, you build an investment portfolio with double impact: you finance both green innovation and make pollution more expensive. It is a holistic way to combine financial performance and tangible contribution to decarbonization.

Hydrogen is undoubtedly a technology of the future and a pillar of the energy transition. For investors, ETFs offer a diversified and accessible gateway to capturing the potential of this promising but risky market. The choice of a fund must be based on careful analysis of fees, size, and especially the underlying index strategy to find one that best matches your vision and risk appetite. Considering this investment over the long term and complementing it with direct impact assets, such as carbon quotas, can enable you to build a resilient portfolio truly aligned with the major challenges of our century.

Frequently Asked Questions about investing in hydrogen ETFs

What are the main companies commonly found in these funds?

The composition varies depending on the ETF, but you frequently find names such as Plug Power (fuel cell specialist), Ballard Power Systems (fuel cell technology), Nel ASA (electrolysers and refueling stations), as well as industrial giants like Air Liquide or Linde Plc, historic players in industrial gas production, including hydrogen.