Renewable energy stocks are popular right now and it’s not hard to see why. With governments and organisations around the world set to spend billions on clean energy projects in the years ahead in an effort to battle climate change, there are likely to be plenty of opportunities for investors.
One of the easiest ways to invest in clean energy stocks is through an exchange-traded fund (ETF). These essentially allow investors to gain exposure to a wide range of stocks with just one trade. With that in mind, here are three UK renewable energy ETFs I’d consider for 2021 and beyond.
iShares Global Clean Energy UCITS ETF
The most popular renewable energy exchange-traded fund in the UK is the iShares Global Clean Energy UCITS ETF (LSE: INRG). It currently has net assets of around $6bn.
INRG tracks the S&P Global Clean Energy index. This index, which aims to hold around 100 companies, is designed to measure the performance of companies in global clean energy-related businesses from both developed and emerging markets. Stocks in the index at present include the likes of Vestas Wind Systems, Solaredge Technologies, Plug Power, and SSE.
The performance of this ETF has been mixed. This year, it has underperformed, delivering a return of -23% to the end of September. However, for the three years to the end of September, it returned 159%, which is an excellent performance. Over the 10 years to the end of September, it returned 186%.
Ongoing fees are 0.65% per year.
Lyxor New Energy UCITS ETF
The Lyxor New Energy UCITS ETF (LSE: NRJL) is a smaller, more under-the-radar offering with net assets of around €1.3bn at present.
NRJL tracks the World Alternative Energy index. This is composed of the world’s 40 largest companies operating in the renewable energy, distributed energy, or energy efficiency sectors, that derive at least 40% of their revenues from alternative energy activities. Stocks in the ETF at present include Schneider Electric, Orsted, Vestas Wind Systems, and STMicroelectronics.
Performance here has been pretty consistent. The latest data (as of 22 October) shows a year-to-date return of 6%, a one-year return of 23%, a three-year return of 128%, and a 10-year return of 270%. Overall, performance has been quite solid.
Ongoing fees here are 0.6%.
L&G Clean Energy UCITS ETF
A third ETF I’d consider is the L&G Clean Energy UCITS ETF (LSE: RENG). This is a relatively new fund that was launched late last year. It currently has net assets of around $125m.
RENG aims to track the performance of the Solactive Clean Energy index. This seeks to provide exposure to a wide range of companies across the clean energy value chain. Some names in the index at present include Aker Solutions, Tesla, Subsea 8, and Saipem.
Because this ETF is relatively new, it doesn’t have a long-term performance track record. However, my calculations show that year to date, it has returned about -2%.
Ongoing charges are 0.49%.
A final word on renewable energy ETFs
It’s worth pointing out that while renewable energy ETFs minimise stock-specific risk because they are diversified, they’re still higher-risk investments. That’s because they are highly focused on the one industry.
Personally, I don’t own any of these ETFs right now as I prefer to invest in individual stocks. This approach allows me to focus my capital on my best ideas.
