The Strive U.S. Energy ETF (NYSEARCA:DRLL), a potentially controversial exchange-traded fund, launched yesterday. Thus far, price action for the DRLL ETF has been relatively bullish, with this fund now trading near its high.
The reason this ETF could be controversial is its underlying premise. Backers Peter Thiel and Bill Ackman have sought to create an ETF with the purpose of promoting energy investment like more drilling. They want to push back against environmental, social and governance (or ESG) mandates which reward oil companies for lowering production.
Fund backers argue that a lack of investment in new energy activity concerns investors. Importantly, this fund is launching with an energy crisis happening in Europe. And for those looking to avoid such a scenario in the U.S., such funds may be appealing.
Let’s take a look at whether this ETF could be the start of a broad-based change in fund flows.
Is the DRLL ETF the Future for Energy Funds?
There’s a reason why ESG is under attack right now. An incredible rise in interest in sustainable investing options has shifted how boardrooms think about their carbon footprint. In general, most investors would probably agree that, as long as the economy can shift to other forms of energy, this force for transition is good.
However, the macroeconomic environment for energy is providing a difficult challenge for oil- and gas-dependent countries. Rising inflation, due in part to higher fuel prices, is hurting the average consumer. Accordingly, energy security has risen in importance in terms of many countries’ goals.
Promoting energy investment, as a short- to medium-term strategy, certainly makes sense right now. This ETF appears to have set out to capture investor demand for such products. Indeed, there’s likely a significant group of investors who see such ETFs as important in keeping the boardroom balance in order.
My take is that it’s possible to cheerlead for a long-term transition to green energy while ensuring energy security today. Both ESG and non-ESG energy ETFs have a role in shaping how oil companies can participate in this transition, and how quickly this transition will happen.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.