Renewable energy: 2 ETFs to buy

Renewable energy is the hot investing trend right now. Paul Summers reveals two ETFs he’s using to ride the green revolution wave.

| 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.

potted green plant grows up in arrow shape

Image source: Getty Images

Just in case you’ve been avoiding all news flow recently, there’s probably no hotter investing space right now than renewable energy. Fortunately, there’s already a plethora of options available to investors looking to tap into the megatrend, including exchange-traded funds (ETFs). Here are two I already own and which I’d feel comfortable adding more of in the years ahead. 

2 ETFs to buy

As it sounds, iShares Global Clean Energy ETF (LSE: INRG) invests in companies that have a finger or two in the clean energy production pie. Alternatively, some holdings may supply the equipment or technology that enables this energy to be generated. 

All told, this ETF has 76 holdings. That’s not exactly concentrated but nor does it present as being overly diversified. This is an important consideration for me. After all, the greater the number of stocks held, the less impact each individual stock can have on returns. As such, I think INRG strikes a nice balance between risk and reward.

Another positive to this fund is the geographical spread. Companies held come from both developed and emerging markets (although 43% are based in the US). UK-listed SSE features in the portfolio, as do firms like and solar power company Enphase Energy.

A second passive fund I’m holding as part of my renewable energy strategy is WisdomTree Battery Solutions ETF (LSE: CHRG). As it sounds, this fund is more focused on energy storage. According to WisdomTree, battery technology has the potential to “significantly transform industries, services, labour and consumption“. Unsurprisingly, the electric vehicle revolution will form a major part of this.

Again, the geographical spread of this ETF is reassuring. By contrast to INRG however, almost 30% of holdings are based in China. Another 20% and 12% are based in the US and Japan respectively.

Some positives

As you might expect, there are advantages and disadvantages to playing the renewable energy theme via passive ETFs. For me, one clear benefit of using trackers is their relatively low cost. The less I give back in management fees, the better my eventual returns will be thanks to compounding.

The iShares and WisdomTree funds have total expense ratios of 0.65% and 0.40% respectively. Neither strikes me as unreasonable considering these are thematic funds. Moreover, the CHRG share price is up 50% over the last 12 months. 

It’s not just about the cost. I don’t claim to have specialist knowledge of the renewable energy space. This lack of investing ‘edge’ suggests buying a diversified fund that tracks indices created by experts in the field would be the more rational move.

Then again…

On the flip side, both funds could still prove volatile. Growth companies in hot areas usually trade on high valuations. And, regardless of renewable energy’s solid prospects, that could prove problematic in the event of a global economic wobble.

In direct conflict with what I’ve stated earlier, the ‘opportunity cost’ of holding these funds over specific shares is potentially very high if I can pick a winner. As the recent performance of Tesla has shown, buying an eventual market leader has the potential to generate life-changing returns. TSLA shares are up almost 2,800% since 2016.

The low/negligible yields from both ETFs also need to be borne in mind if I was looking to generate passive income. If that’s key, dividend-focused funds like these in this area might be more appropriate.

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 considered so you should consider taking independent financial advice.

Paul Summers owns shares of iShares Global Clean Energy ETF and WisdomTree Battery Solutions ETF. The Motley Fool UK has no position in any of the shares mentioned. 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

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

How I’d invest £5,000 in FTSE 100 shares to aim for a million

The FTSE 100 is home to many potential gems. Our writer considers if he can reach millionaire status by uncovering…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

How I’m aiming to become a Stocks and Shares ISA millionaire!

The Stocks and Shares ISA is an excellent vehicle for investments. In fact, many investors have become ISA millionaires. Here's…

Read more »

Mixed-race female couple enjoying themselves on a walk
Investing Articles

The Scottish Mortgage share price is on the up! Here’s why I’d buy

After a poor first half of the year, the Scottish Mortgage share price is beginning to rise. Here, this Fool…

Read more »

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

Should I be grabbing cheap Lloyds shares?

Lloyds shares have underperformed in recent years. Here, this Fool explains why he's still considering the stock for his portfolio.

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

How I’m using UK dividend shares to try and turn £20,000 into £100,000

Our writer has ambitious investment goals -- and patience. Here he explains how he's buying UK dividend shares to try…

Read more »

Middle-aged lady in wheelchair writing on whiteboard
Investing Articles

I’m taking a defensive stance by investing in the FTSE ahead of the recession

The FTSE has outperformed several indices in 2022, including the S&P 500. Jacob Ambrose Willson believes it can be used…

Read more »

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

Should I buy BP shares today?

BP is generating huge profits right now. Here, Edward Sheldon looks at whether he should buy shares in the oil…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Should I buy Rolls-Royce shares after the latest results?

Jon Smith runs over the key points from half-year results for Rolls-Royce shares to see if any green shoots are…

Read more »