Here, I’m going to look at two ETFs that I’d buy today to fire up an ISA.

Global clean energy

When I imagine which types of companies might become very large in future, I keep returning to the theme of carbon reduction. That’s because the energy transition is a multi-decade process that will need vast amounts of investment and the brightest minds to get right.

Which brings me on to iShares Global Clean Energy UCITS ETF (LSE: INRG). This fund tracks the S&P Global Clean Energy index, which consists of about 100 listed companies involved in clean energy production.

The holdings include First Solar and Vestas Wind Systems, the world’s leading wind turbine manufacturer. It also holds Orsted, which recently unveiled its first solar project in the UK.

Now, clean energy projects tend to be highly sensitive to interest rates because building the infrastructure requires lots of capital up front. So, as rates have risen sharply, the renewable energy sector has encountered headwinds. These could persist for a while.

This is reflected in the share price, which has fallen 34% over the past year. However, zooming out over five years, the performance has been much better, with the shares rising 84%.

I think this dip could represent a good time to invest, especially as interest rates may soon peak. So I intend to open a position myself soon.

UK smaller companies

Next, I’d invest in the iShares UK Small Cap UCITS ETF (LSE: CUKS). This gives investors exposure to 255 UK stocks, with a particular focus on smaller-sized companies. These range from Centrica and Games Workshop at the top end to Moonpig and Judges Scientific at the other.

The UK smaller companies category has fallen massively out of favour this year and is one of the worst-performing globally. Rising rates to tackle stubbornly high inflation have fuelled the threat of a recession, and that risk remains.

Consequently, the fund’s share price has fallen 22% over the last two years (though it’s only down 8% over five years).

Nevertheless, I think there are reasons to be optimistic this performance can improve.

First, as mentioned already, interest rates may be about to peak as inflation cools. This should improve investor sentiment around UK-focused firms.

Plus, it should be remembered that the UK economy has so far managed to avoid recession, while the pound has strengthened against the dollar. And many smaller growth companies continue to show resilience.

Across the pond, the successful IPO of UK-based Arm Holdings could convince other British private firms that the waters are safe to go public here. Indeed, Goldman Sachs sees the European IPO market making a comeback next year. That may revive investor enthusiasm.

Finally, nine of Britain’s largest defined contribution pension schemes recently agreed to allocate at least 5% of their funds to unlisted UK start-ups by 2030. That could boost long-term interest in the small-cap scene.

I’m considering adding this ETF to my ISA due to the big turnaround potential.

The post 2 quality ETFs I’d buy today to kickstart a Stocks & Shares ISA appeared first on The Motley Fool UK.

Fortunately, there are a growing number of energy exchange-traded funds, or ETFs, that help solve this problem.

But what exactly are these investment vehicles? And how can an investor use them to tap into the opportunities of the energy sector?

Let’s break it down.

What is an energy ETF?

An energy exchange-traded fund (ETF) focuses exclusively on investing in financial assets and securities relating to the energy sector. They enable investors to quickly and easily gain exposure to a diverse range of stocks, bonds, commodities, and other derivatives with a single transaction.

There are numerous sub-sectors within the energy industry, including traditional oil & natural gas, as well as alternative and green energy. While some energy ETFs may focus on the sector in general, many are highly specific, only targeting certain aspects.

Today, there are approximately 30 energy ETFs listed on the London Stock Exchange. And the vast majority have a unique strategy that caters to a wide range of investors seeking growth while keeping risk in check.

Top energy ETFs in the UK

The London Stock Exchange is home to various energy ETFs that invest in a broad range of assets revolving around traditional and renewable technologies. Here are the top energy ETFs by market cap as of January 2026.

iShares Global Clean Energy

The iShares Global Clean Energy ETF contains a diversified portfolio of 128 different shares primarily in the mid-cap segment of the global stock market.

The fund’s objective is to provide investors with exposure to companies that generate clean energy through renewable technologies, including solar, wind, and hydro. Additionally, the fund uses various ESG screens to exclude companies that derive the majority of their revenue from deals relating to weaponry, military contracting, oil & gas exploration, tobacco, or thermal coal.

Its top five holdings include:

1. First Solar Inc – 8.9%
2. Bloom Energy Corp – 7.7%
3. Iberdrola SA – 6.5%
4. Vestas Wind Systems A/S – 6.3%
5. Nextpower Inc – 6.0%

WisdomTree Energy Transition Metals

The WisdomTree Energy Transition Metals ETF contains a diversified commodities portfolio focused on metals critical to the global renewable energy transition. This includes electric vehicles, transmission, charging, energy storage, solar, and wind energy, as well as hydrogen production.

It grants investors exposure to various futures contracts and tracks the WisdomTree Energy Transition Metals Commodity Index.

The commodity composition of the portfolio consists of:

• Silver – 19.7%
• Copper – 17.7%
• Aluminium – 17.6%
• Nickel – 12.6%
• Zinc – 10.7%
• Tin – 8.0%
• Lead – 7.3%
• Platinum – 3.1%
• Cobalt – 2.0%
• Lithium – 1.5%

Global X CleanTech

The Global X CleanTech ETF contains a diversified portfolio of 38 companies operating within the information technology, industrials, materials, and consumer discretionary sectors. Each business is positioned to benefit from the increased adoption of technologies that boost renewable efficiency and reduce natural resource consumption.

Approximately 46.8% of the stock portfolio consists of companies listed in the US, with the rest being diversified globally.

Its top five holdings include:

1. Vestas Wind Systems A/S – 7.4%
2. Bloom Energy Corp – 7.3%
3. First Solar Inc – 6.3%
4. Samsung SDI Co Ltd – 6.3%
5. Nextpower Inc – 6.3%

How to invest in energy ETFs

Industry-based ETFs can be bought and sold like regular stocks using a brokerage account. However, suppose an energy ETF is listed on an exchange not supported by an investment account? In that case, buying shares in the fund will not be possible without an account that offers access to that exchange.

For example, a fund listed on the New York Stock Exchange cannot be purchased by a British investor if their broker only provides access to the London Stock Exchange and vice versa.

Are energy ETFs a good buy?

Investing in energy stocks through an ETF is a convenient method for investors to instantly diversify and gain exposure to the industry. Given the complex nature of the various companies within the sector, these investment vehicles serve as a beginner-friendly option to tap into new opportunities with minimal knowledge.

Having said that, ETFs have some caveats.

As previously mentioned, these funds incur management fees that can eat into overall returns.

Furthermore, they are likely unsuitable financial instruments for investors seeking to outperform the stock market in the long run. Why? Because ETFs, by design, are intended to track the performance of a particular benchmark index, industry, or commodity, not beat it.

Therefore, investors need to consider both the advantages and disadvantages of energy ETFs to determine whether they are a “good buy” for their personal portfolios.

The post Top UK Energy ETFs of 2026 appeared first on The Motley Fool UK.

Sanlam Global Artificial Intelligence Fund

What it does: Sanlam Global Artificial Intelligence Fund aims to provide long-term capital growth through diversified exposure to companies involved in artificial intelligence.

By Paul Summers. I reckon artificial intelligence (AI) is likely to be one of the most significant/lucrative investment themes of the next decade and beyond. That’s why I’ve been gradually adding to my stake in this specialised fund from Sanlam over 2022. My plan is to continue doing so in 2023, especially with stocks being so out of favour. “Be greedy when others are fearful,” as Warren Buffett puts it. 

The Sanlam fund invests in companies that are engaged in research and development and/or the provision of services connected with artificial intelligence. These include Alphabet, Tesla and UnitedHealth Group.

With only 37 holdings in the portfolio, this is unlikely to be the smoothest of rides for investors. However, one only needs to look at the returns so far to see how this concentration can pay off.

Although past performance is no guide to the future, the Sanlam fund has delivered 16.3% annualised since inception. This makes the 0.5% ongoing fee look very reasonable, in my opinion.

Paul Summers owns shares in Sanlam Global Artificial Intelligence Fund.

iShares Global Clean Energy ETF 

What it does: iShares Global Clean Energy ETF invests in green technology manufacturers and low-carbon energy producers.

By Royston Wild. A growing global population means energy consumption is also steadily rising. Yet the future role of fossil fuels in addressing this increased demand is set to diminish as countries seek to reduce their carbon emissions. 

This leaves huge potential for funds that invest in renewable energy stocks and green technology. The iShares Global Clean Energy ETF (LSE: INRG) is one such investment fund I think could thrive in 2023 and beyond.

This exchange-traded fund has more than $6.3bn invested in around 100 companies. These businesses are located in both developed and emerging regions, too, giving the fund added strength through geographical diversification. 

iShares Global Clean Energy’s largest holding is Enphase Energy, a business that builds microinverters, batteries and other hardware for solar systems used on homes. It also owns stakes in clean energy producers like Spain’s Iberdrola and Danish offshore wind specialist Orsted. 

The fund’s returns could suffer if unfavourable weather conditions hit renewable energy production. But on balance I think this ETF might prove an exceptional long-term investment.

Royston Wild does not own shares in iShares Global Clean Energy. 

James J. McCombie: Fidelity Special Situations Fund

What it does: This is an active and discretionally managed UK-focused contrarian value equity fund with a small-cap bias.

By James J. McCombie. Following the investing principles of legendary fund manager Anthony Bolton, the Fidelity Special Situations Fund is managed with a contrarian value approach. Unloved companies, whose future earnings prospects are deemed to be greater than the markets’ pessimistic view of them, are the order of the day. 

Falling into value traps is a concern. The strategy relies on seeing operational and performance changes ahead of the market or forecasting a change of sentiment. But sometimes the market is not wrong, and shares are cheap precisely because they should be. However, the 10-year annualised return is 7.5% and the fund has outperformed its FTSE All-Share benchmark, suggesting the managers have not sprung too many traps. 

With many investors showing a bias to growth, either wittingly or unwittingly, this value fund offers style diversification. In addition, there is a small-cap bias, offering size diversification to large-cap focused investors.

James J. McCombie does not have a position in the Fidelity Special Situations Fund

FTF Martin Currie UK Rising Dividends

What it does: This is a UK-focused fund, which invests in stocks that are increasing their dividend payments.

By Edward Sheldon, CFA. Dividend stocks were one of the best-performing areas of the stock market in 2022, and I reckon they’re likely to continue outperforming in the near term. Therefore, I’ve selected FTF Martin Currie UK Rising Dividends as my top fund for 2023.

What I like about this fund is that it focuses on companies that are growing their dividend payouts. This is a smart strategy, in my view. Generally speaking, companies that raise their dividends continually tend to produce strong total returns (capital gains plus dividends) over time. 

I also like the fact that the fund owns plenty of high-quality companies. Names in the top 10 holdings at 31 October included Unilever, Diageo, and Experian.

One downside to this fund is that it only invests in UK stocks. So, it’s not fully diversified geographically.

Overall though, I see it as a solid investment fund for 2023. Fees are low at 0.54% per year (through Hargreaves Lansdown).

Edward Sheldon owns shares in Unilever, Diageo, Experian, and Hargreaves Lansdown

The post Best British investment funds for 2023 appeared first on The Motley Fool UK.

Clean energy is an investment theme that appears to have a lot of potential. Should I buy this iShares ETF for my investment portfolio though? Let’s take a look.

The iShares Global Clean Energy UCITS ETF explained

Let’s start with a look at what the iShares Global Clean Energy UCITS ETF is all about.

On the iShares website, it states that this ETF invests in companies (across both developed and emerging markets) involved in clean energy production, or the provision of clean energy equipment and technology. The aim of the ETF is to track the S&P Global Clean Energy index, which consists of about 100 renewable energy-related stocks.

Ongoing fees are 0.65% per year.

What stocks does INRG hold?

As for the stocks the ETF holds, it’s an interesting list of names. Here’s a look at the top 10 holdings as of 7 November:

There are some good companies on that list.

Enphase Energy, for example, impresses me. It’s a solar power and battery storage specialist. In recent years, it has registered strong top- and bottom-line growth.

However, there are also some companies on that list I’m not so excited about. Hydrogen fuel cell company Plug Power is one. This is a stock that is being heavily shorted by hedge funds (meaning that they expect it to fall).

In terms of the geographic split, the ETF currently has the most exposure to the US, at 38% of the portfolio. China is the second largest weighting, at 13%.

Has INRG been a good investment?

What about performance? Has the iShares Global Clean Energy UCITS ETF been a good investment in the past?

Well, to help answer that question, I’ve provided one-, three-, five-, and 10-year performance (annualised) in a table below (all figures to 31 October). I’ve also included the performance of iShares ETFs tracking the MSCI World index, the FTSE 100, and the S&P 500 over the same time horizons.

As you can see, over the last year, the clean energy ETF’s performance has been poor. It has underperformed all the other ETFs.

However, over a longer-term horizon, performance has been pretty good. Over three, five, and 10 years, it has beaten the other ETFs.

The takeaway here is that INRG tends to have hot and cold periods. A few years ago, it had a really hot run where performance was excellent. Right now, however, performance has gone a little cold.

Should I invest?

So should I buy this ETF? Well, there are definitely things I like about it. I like the fact that it provides one-click access to a broad range of clean energy stocks. And I like the performance over three, five, and 10 years.

However, all things considered, I think I’d prefer to buy a selection of individual clean energy stocks myself. This approach would give me more control over my holdings, and could allow me to generate even higher investment returns, if I pick the right stocks.

The post Should I invest in the iShares Global Clean Energy UCITS ETF (INRG)? appeared first on The Motley Fool UK.

Why a Stocks & Shares ISA, though – wouldn’t a Cash ISA be safer for me? The problem is that even the highest paying Cash ISA (Gatehouse Bank five-year fixed term) only offers 2.1% currently. With today’s inflation rates, that’s effectively locking in a guaranteed negative return.

That doesn’t sound too good to me, especially as the daily cost-of-living crisis rumbles on.

Fortunately, as a Foolish investor, I’m looking to invest my cash for the long term. This means I’m ok with accepting a higher level of risk – with the hopes of a higher return.

What I want is a balanced portfolio, one that diversifies my risk across both income and growth-focused investments.

So, what do I invest in?

Beating inflation with tax-free passive income

If I were to pick one share for passive income right now, I’d go for City of London Investment Group (LSE: CLIG).

It has steadily increased its dividend yield by ~3.2% each year since the first payment in 2012. With its current level of ~6.8%, that’s much better than both cash and the FTSE 100 average dividend of ~3.5%.

Plus, by using my Stocks & Share ISA wrapper, I avoid ending up with an effective return of ~5.4% as a basic rate taxpayer. The more passive income I can keep, the better.

The risk I have with this share is its dividend cover level at ~1.2. That’s a little low for comfort. It is at least better than it was in ’20, so heading in the right direction now.

Adding growth with renewable energy

Tax-free income is great – but I also want to ensure I’m inflation-proofing my underlying capital by investing in sectors I expect to grow in the future.

And it’s difficult to ignore the renewable energy sector as an ever-increasing global market.

Renewable energy is a core interest of mine, having worked closely in the industry. It’s an area I want to be invested in.

But I think it’s still unclear who will be the biggest winners and losers as different technologies continue to compete.

For that reason, for now, I’m continuing to hedge my bets with IShares Global Clean Energy ETF (LSE: INRG)

I started investing in this exchange-traded fund back in 2017 but, despite the rapid increase since then, I’m continuing to hold for the future.

Support for renewable energy support is only growing as governments look to tackle their energy supply challenges, like with the UK Government’s Energy plan released last week.

This exchange-traded fund comes with a cost of 0.65% but I think that’s worth it for the diversification it offers across different renewable technologies.

My main concern is its limited 77 holdings and a sizeable US bias. I’ll want to balance that out soon.

After all, finding the right balance is what good Foolish investing is all about.

And for me, that means growth and income – all tax-free – in a Stocks & Shares ISA.

The post How I’m boosting my tax-free passive income in a Stocks & Shares ISA appeared first on The Motley Fool UK.

This confidence received another boost earlier this week.

Hot sector

A report issued on Wednesday by the climate and energy think tank Ember said clean energy sources generated 38% of the world’s electricity last year. Some 10% of global electricity came specifically from wind and solar. That’s double the percentage produced seven years ago when the Paris climate agreement was penned.

These are headline-grabbing numbers. What I found even more interesting was that the three ‘fastest switchers’ are in very different parts of the world: Australia, Vietnam and the Netherlands. For me, this is clear evidence that the push toward renewable energy sources is unquestionably global and will come to dominate production sooner than I had ever imagined.

Thankfully, I’ve already put some of my money where my mouth is.

How I’m investing

In the aftermath of the coronavirus crisis, I began building a position in the iShares Global Clean Energy ETF. As its name implies, this passive fund seeks to offer investors access to a group of companies that specialise in either producing clean energy or providing the means and equipment to do so.

Some computer-managed funds track thousands of company stocks. Here however, the portfolio is relatively concentrated with 76 holdings. Personally, I’m happy with this number. It’s large enough to mitigate some risk. Then again, it’s not so large as to completely dilute the gains made by what turn out to be the best performing members.

Knowing that my money is spread between developed and emerging markets adds another element of diversification. It also gives me exposure to many companies I would otherwise remain oblivious to. This is important as I don’t have the time (nor intellectual prowess) to become an expert in renewable energy stocks. As passive investing legend John Bogle recommended, I’ve elected to simply “buy the haystack” instead.

Risks to consider

Despite evidence that the move to cleaner sources of energy is gathering serious pace, the performance of this ETF has been volatile, to say the least. Having returned 140% in 2020, the fund then fell 24% in 2021. This pretty much wiped out the gains I’d accumulated since buying. The fact I’m paying a fee regardless of performance (0.65%) makes this even more frustrating. It also serves as a reminder that I could potentially lose money here as well as make it.

That said, my Foolish training reminds me of the need to be patient. The real spoils could come in the next couple of decades rather than the next couple of months. Knowing this, I’m embracing any price weakness right now.

Other options

Naturally, there are other options available to me should I decide to increase my exposure to renewable energy stocks. These include managed funds (which usually charge higher fees) as well as specific company stocks (which usually increase risk).

As things stand however, I’m happy with my single fund exposure to renewable energy stocks for now. When a theme as potentially huge as this comes along, I think it’s a good idea to climb on board and adapt as I go. This is far more preferable to never starting at all.

The post Here’s why I’m invested in renewable energy stocks appeared first on The Motley Fool UK.

iShares Global Clean Energy ETF

This exchange traded fund (ETF) aims to track the performance of the S&P Global Clean Energy Index. It tracks the performance of companies in the relevant sector, while also taking into account the carbon footprint of these companies.

This fund is large at over $4.5bn, has been going for some time (since 2007) and has good trading volume. I think the ongoing charge of 0.65% is reasonable. It’s also well diversified across countries and renewable energy sectors.

For example, one of its largest holdings is Enphase Energy, accounting for just under 8%. This is a solar energy company, which among other things, produces a critical component converting solar energy into electricity. Another interesting holding is Plug Power. This is a US firm involved in the development of hydrogen fuel cells with the goal of using these to replace batteries, for example in electric cars.

The outlook

Despite the recent poor performance of the price of this ETF, over the long term, I believe there are reasons to be optimistic.

First, I see an increase in the number of holdings in the fund as a good thing. This is primarily because a wider spread of firms should mean the ETF is more robust. If one or two of the companies fail, it shouldn’t hurt it too badly overall.

Second, green energy is likely to be an increasingly important part of global energy production. Finally, this is an ethical investment sector and will probably benefit from government support across the globe over the next decade. Indeed, renewable energy investment is vital if the world is going to achieve the goals of limiting global warming and tackling climate change.

However, there are near-term risks. 2022 might see the continued dominance of traditional energy companies. It’s possible oil and gas prices will rise further especially if the Russia-Ukraine tensions escalate. This is likely to increase the share prices of these firms, whose profits heavily rely on the value of these commodities. In this scenario, we might see money move out from renewable energy stocks like those in this ETF in favour of fossil fuel firms. That is likely to hurt the price of the fund further.

Therefore, for my own portfolio, it’s still too uncertain for me to invest. I’m happy to sit on the fence for the time being and revisit iShares Global Clean Energy ETF in a few months. In the meantime, I will keep looking for other opportunities.

The post Should I buy or avoid iShares Global Clean Energy ETF? appeared first on The Motley Fool UK.

• 2021 was not a good year for most renewable energy stocks
• Rising oil and gas prices in 2022 are likely to be good for traditional energy companies
• Green energy will remain an important area of investment over the long term

2021 should have been a stellar year for renewable energy stocks. In the UK we had the UN COP26 Summit. Over in the US, President Joe Biden announced a record spending package for green energy. However, clean energy stocks generally performed poorly last year.

What happened last year?

For some time, I have been looking at iShares Global Clean Energy UCITS ETF (LSE: INRG) for my own portfolio. This is an exchange traded fund (ETF), which allows me to invest in several companies by holding just one share.

This ETF aims to track the performance of the S&P Global Clean Energy Index, which is designed to measure the performance of companies in the relevant sector, while also taking into account the carbon footprint of these companies.

The five-year performance of this fund has been impressive with an increase of around 100%. However, during 2021 it fell by around 36%.

Why did this happen? There are several reasons. First, in April, the index behind this ETF changed its methodology, which could have led to a sell-off. The changes allow the index to include more companies from a wider number of countries. The number of companies has increased from 30 to almost 80. Some commentators feel the fund’s theme is now “less green”, but I see including more companies as a positive development in general.

Second, during the last year, some of the US companies in the fund suffered because of bad weather affecting their output and hence their earnings (most noticeably in Texas).

Third, the worldwide energy crisis has seen money moving away from renewables in favour of traditional energy companies. In fact, some of the best-performing ETFs in 2021 were those involved in the oil and gas sectors.

Finally, there’s likely to have been some good old-fashioned profit-taking. Those investors who bought shares in the fund a few years ago would have been sitting on some substantial profits in the first half of 2021. Perhaps they used the opportunity to sell and realise some of those gains.

How might 2022 develop?

I believe that 2022 might be a difficult year for INRG. In fact, year-to-date it’s already down around 8%.

The energy crisis is far from over and it’s probable oil and especially gas prices will rise further. This is likely to be good news for traditional energy stocks, whose profits heavily rely on the prices of these commodities.

However, longer-term I remain optimistic for the fund. Not only does clean energy investment form part of the ethical sectors movement’s becoming increasingly popular, but this area is likely to benefit from international government support over the next decade. 

Renewable energy investment is vital if the world is going to achieve the goals of limiting global warming and tackling climate change. For this reason, I’m not abandoning this fund yet and will revisit it later in the year to see if it’s still a good option for my portfolio.

The post This ETF fell 36% last year. Has the renewable energy stock run out of power? appeared first on The Motley Fool UK.

A renewable energy ETF

For my own portfolio, rather than investing in individual shares, I like the idea of using an ETF (exchange traded fund). This allows me to invest in several companies while just holding one stock and ETFs usually have low ongoing charges.

The one I’m contemplating is iShares Global Clean Energy UCITS ETF (LSE: INRG). This tracks the performance of the S&P Global Clean Energy Index, which measures the performance of companies  from both developed and emerging markets. It also takes into account the carbon footprint of these companies.

This ETF is large at over $6bn, it’s well established (launched in 2007) and has good trading volume. I think the ongoing charge at 0.65% is reasonable.

Presently this ETF has 76 holdings, spread over a number of countries and across a variety of renewable energy sectors. I take comfort from this fund being diversified in terms of countries and companies. If any one or two of the companies get into problems then this ETF should hold up pretty well. I also like that it pays a dividend, albeit small and currently standing at 0.73%.

Looking at the holdings, there are some that I think will benefit from a further tilt towards solar and wind power. For example, Enphase Energy is the largest holding in the fund, accounting for almost 9%. This is a solar energy company, which among other things, produces a critical component to convert solar energy into electricity.

Should I invest?

There’s a compelling case for me to invest in renewable energy stocks, I feel. Not only is it an ethical sector, but this area is likely to benefit from international government support over the next decade.

However, year-to-date performance has been poor. At the time of writing, the ETF is down around 20% for the year and is about flat over a 12-month period.

The lacklustre performance is due to a variety of reasons. First, some of the US companies in this fund will have suffered because of bad weather affecting their output and therefore their earnings (for example, in Texas). Second, the energy supply squeeze all around the world at the moment may have seen money move into more traditional energy companies.

Despite that, over the last five years, the fund is up around 160%. This gives me confidence in the long-term outlook for this ETF.

I could be wrong, but I’m upbeat about renewable energy stocks and this ETF. For this reason, I’m seriously considering adding iShares Global Clean Energy UCITS ETF to my portfolio.

The post Should I buy this renewable energy ETF now? appeared first on The Motley Fool UK.

Why I’m looking at renewable energy stocks

There’s a compelling investment case for renewable energy stocks. Not only is this an ‘ethical’ sector, but this area is likely to benefit from widespread government support over the next decade.

According to an IEA report, though $750bn should be spent globally on clean energy technologies in 2021, spending would have to increase significantly to meet the 1.5% cap on temperature rises. This level of investment is likely to mean that this sector should enjoy substantial gains over the coming years.

What I’m looking at

I could invest in individual renewable energy stocks, but I like the idea of using an exchange traded fund (ETF). This allows me to invest in several companies while holding just one share.

The one I’m considering is iSHARES Global Clean Energy UCITS ETF (LSE: INRG). This ETF aims to track the performance of the S&P Global Clean Energy Index. It’s designed to measure the performance of companies in global clean energy-related businesses from both developed and emerging countries, while also taking into account the carbon footprint of these companies.

Looking at the fundamentals, this ETF is large at over $6bn, established (launched in 2007) and has good trading volume. I think the ongoing charge of 0.65% is reasonable.

Presently the ETF has 76 holdings. 44% is in US companies, while Chinese firms account for around 4.5% and investment in UK entities presently stands at just under 4%. I like the fact this ETF is diversified in terms of countries and companies. If any individual company fails or there are certain country-specific problems, the ETF should hold up pretty well. It also pays a small dividend, which currently stands at 0.73%.

Am I going to invest?

Year-to-date performance hasn’t been good, however. Currently, the fund is down around 15% this year and is about flat over a 12-month period.

The subdued 12-month performance could be due to a variety of reasons. Some of the US companies in this fund have most likely suffered because of bad weather affecting their output and hence their earnings (for example, in Texas). Also, the energy supply squeeze all around the world at the moment may have seen money move into more traditional energy companies.

However, over the last five years, the fund is up around 180%. I take this as an affirmation of the long-term credibility of this ETF.

Although some investors may feel differently, overall, I think that this ETF might be one of the best ways for me to invest in renewable energy stocks. I believe this sector can perform strongly over the coming decades and am upbeat about this ETF. For this reason, I will be seriously considering adding iShares Global Clean Energy UCITS ETF to my portfolio.

The post Should I buy this exchange traded fund focused on renewable energy stocks? appeared first on The Motley Fool UK.