You can make green and renewable energy investments in a number of ways – including through a fund manager, Exchange Traded Funds (ETFs), or by buying green shares directly.
ETFs are funds which track the performance of a bunch of stocks. The iShares Global Clean Energy ETF, which invests in renewable energy companies, is an example of an ETF with exposure to green investments.
Note that buying shares directly can be very risky – you could lose all of your money if the shares plummet after you invest in them.
“The share prices in green energy companies had an extraordinary run in 2020 as [the shares of] some of these companies doubled in value – however, those share prices came off quite a lot this year,” said Brian O’Reilly of Mediolanum Asset Management. “As with all new areas of growth, the green energy and green sector will be a volatile one to invest in but it is one of the strongest secular trends taking place in the world today.”
Choose a fund manager with experience and expertise in green investments. There are a number of specialist fund managers – such as KBI Global Investors – with expertise in the green and renewable energy space. “You may pay a bit extra [in fees] by going through a fund manager,” said O’Reilly, “however, green investments are a complex and technical area and there’s a big debate around which technologies will win out: for example, will it be solar, wind or even nuclear – and which companies are at the forefront of developing renewable technologies in these areas? Fund managers will have done their research around that and a lot of the fund managers in this space come from the energy industry [so they have expertise].”
Greenwashing – where a company misleads people into thinking its products or services, or the company itself, are sustainable when this is not the case has become an issue. “Most companies are recognising that they need to say they are green to attract investors – particularly younger investors,” said Tara Doyle, of Matheson.
Where a company or fund makes claims they are green, check.
Decide too what it is you are trying to achieve with your investment. “For example, do you believe in wind farms and want to invest in wind farms for that reason?,” said Doyle. “Or are you providing for your future and wanting to do it in a conscientious way?”
Never put all your eggs in one basket when investing.
“One approach could be a ‘core and satellite’ technique – where the core [of an investment portfolio] is invested in a well-diversified portfolio like an all-weather multi-asset fund,” said O’Reilly.
“Then depending on an investor’s tolerance for risk, for the satellite part [of the portfolio], identify some trends and themes like clean energy and ESG that will play out over the longer term.”