Hydrogen is a fuel of the renewable energy future. Investing in hydrogen stocks is a way for investors to track growing production and use of the gas.
Risk of investing in hydrogen: You may lose money up to the total loss of your investment due to technological risk, risk of investing in small companies or risk of limited diversification. Investment in hydrogen includes risk.
Over time, hydrogen is heralded as one of the great hopes for decarbonizing the global economy. Hydrogen will need to fill gaps where electricity cannot easily replace fossil fuels. This includes using hydrogen-based fuels for ships and planes, as well as in heavy industries like steel and chemicals.
Yet, there remains a shortfall between hydrogen production capacity and use in the economy on the one hand, and what’s needed to reach a net zero economy by 2050 on the other, according to the International Energy Agency (IEA).1 That’s despite hydrogen production capacity rising and governments around the world adopting hydrogen strategies. This creates a potentially positive case for investing in hydrogen.
1 IEA Net Zero by 2050 Scenario. https://www.iea.org/fuels-and-technologies/hydrogen
Hydrogen is a natural gas, consisting of two hydrogen atoms, with the chemical symbol H2. It is the lightest element and the most abundant substance in the universe. Two hydrogen atoms with an oxygen atom make up a water molecule (H2O).
When planning to invest in hydrogen, it is important to note that not all hydrogen is environmentally friendly. At the moment, most hydrogen is produced from fossil fuels and is known as ‘grey’. Hydrogen is described using the following color codes, which refer to its environmental credentials.
Investors can invest in hydrogen via different means:
Hydrogen ETF is a relatively cost-efficient way to invest in hydrogen in a diversified manner. The VanEck Hydrogen Economy UCITS ETF invests in 25 hydrogen stocks from all over the world.
Many governments have created public hydrogen funds. However, to our knowledge, as of today there are only few open-ended active hydrogen funds allowing retail investors to invest in hydrogen.
An investor can decide to buy individual hydrogen stocks in order to invest in hydrogen. Our dedicated page provides information on hydrogen stocks.
As hydrogen is a relatively new technology, investing in hydrogen carries several risks. Among others, these include:
Some of the technologies associated with hydrogen production are still being developed. Predictions for large-scale applications might not materialize. Alternative technologies, like batteries, might take up a larger share of future growth than expected. This is one of the factors to take into account when planning to invest in hydrogen.
Many hydrogen companies are relatively small. Smaller companies can be more volatile, less liquid and have less access to financing then larger companies.
Restricting one’s investing to a single sector makes one particularly dependent on its evolution. Generally, it would be preferable to diversifying investments across multiple sectors and asset classes. That is an additional risk aspect to take into consideration before deciding to invest in hydrogen.
