Renewable energy stocks: should I invest in the iShares Global Clean Energy ETF?

The iShares Global Clean Energy UCITS ETF is one of the most popular ETFs in the UK. Edward Sheldon looks at whether he should buy it for his portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Windmills for electric power production.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

iShares Global Clean Energy UCITS ETF (LSE: INRG) is very popular right now. On Hargreaves Lansdown, for example, INRG is currently the most owned Exchange Traded Fund (ETF) on the platform. Clearly, UK investors are bullish on the renewable energy theme.

Should I buy for my own investment portfolio? Let’s take a look.

iShares Global Clean Energy UCITS ETF review

Before I take a look at its holdings and performance, it’s worth examining its aim and investment strategy.

The product’s aim is to generate returns for investors in line with the returns from the S&P Global Clean Energy index. This index is designed to measure the performance of around 100 companies in clean energy-related businesses from both developed and emerging markets. While this index is global in nature, around 40% is allocated to US clean energy stocks. 

It’s worth noting that INRG takes a medium-to-long-term view on the clean energy sector.

What renewable energy stocks does INRG hold?

Looking under the bonnet, the iShares Global Clean Energy UCITS ETF contains an interesting list of stocks.

Here’s a look at the top 10 holdings as of 29 October. These made up just over 50% of the portfolio.

iShares Global Clean Energy ETF

There are certainly some good companies in that top 10. Solaredge Technologies, for example, is a stock that stands out to me. Over the last three years, its revenue has grown by an impressive 140%. And it’s profitable too. Last year, it delivered earnings of $140m on revenue of $1.46bn.

At the same time, there are some companies I wouldn’t want to invest in. Plug Power is one. This stock has been targeted by short sellers this year and currently has short interest of around 13%. This suggests many institutions expect the stock to fall.

Overall, I can’t say I’m particularly excited by the top 10 holdings. 

Performance

Turning to performance, this has been quite volatile in recent years.

  YTD 1 year 3 years 10 years Since inception
Total return (to 30/9/21) -22.74% 17.88% 158.60% 185.76% -40.56%

This year, the ETF hasn’t performed well. As of 30 September, it was down 22.74% for the year. Considering that global equity markets have generally delivered double-digit returns this year, that’s a poor performance.

However, over the three years to 30 September, the ETF delivered a return of just under 160%. That’s excellent.

Zooming out further, long-term performance hasn’t been so good. Over the 10 years to 30 September, it delivered a return of 186%. That’s below the return of the MSCI World index, which returned 224%. Meanwhile, since its launch in 2007, it has delivered a return of -41%. That’s poor.

Overall, the takeaway here is that performance has been very inconsistent over time. At times, the clean energy sector’s been hot. At other times, it’s been cold as ice.

Should I invest in INRG?

Weighing everything up, I don’t see the iShares Global Clean Energy UCITS ETF as a good fit for my portfolio. I’m not overly bullish on the ETF’s holdings and I’m not that impressed with its long-term performance.

All things considered, I think there are better ways to play the renewable energy theme.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares of Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown and SolarEdge Technologies. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Are last month’s 2 biggest FTSE 100 losers the best shares to buy today?

Sometimes the best shares to buy are those that have taken the biggest beatings and are cheaper as a result.…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

Warren Buffett believes this one investing rule is key to his success

In this article, I'll use my position in a UK-listed ETF to help illustrate a well-known 'investing trick' that's favoured…

Read more »

Investing Articles

How many National Grid shares must I buy for a £100 monthly second income?

I think National Grid could be one of the safest options for investors seeking a dividend income. And today its…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

NIO stock is down 90%. Will it recover?

NIO stock has fallen significantly from its 2021 all-time high. But could now be a chance for this Fool to…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 UK shares could help me reach £1,000,000 in my Stocks and Shares ISA

A FTSE 100 compounding machine and a FTSE 250 value stock are the UK shares Stephen Wright thinks could help…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

If I’d invested £1,000 in Lloyds shares at the start of the year, here’s what I’d have now

The stock market is unmoved, but Stephen Wright thinks last year’s record profits might give Lloyds shares a long-term boost.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

I’ll snap up shares in this growth stock in March if others don’t get there first

This Fool says shares in this growth stock are stable, full of profit, and might be undervalued. But there are…

Read more »

Rainbow foil balloon of the number two on pink background
Investing Articles

My 2 top energy investment trust picks for a passive income

I'm aiming to buy more of these investment trusts for a passive income and the reasonably stable energy sector returns…

Read more »