When Should I Buy Clean Energy Etfs
When to buy an investment is a personal decision. You should make that decision based on your investment goals, your investment timeline, and your beliefs about how an investment will perform in the future.
Most clean energy ETFs hold shares in businesses, which means they can be volatile. If youre investing for the short term, this volatility may be difficult to handle.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
Best For Gaining Exposure To The Asian Market: Spdr Msci Emerging Markets Fossil Fuel Reserves Free Etf
EEMX is a fund that tracks a portion of the MSCI Emerging Market Index. Investing in a fund that tracks this index is a smart move if you want to gain exposure to the Asian market.
The MSCI Emerging Market Index reflects the economies of 27 different emerging countries. There is a focus on China, Taiwan, and South Korea through investments in sectors like IT, finances, communication, consumer products, and materials.
The problem with this index is that it also includes investment in fossil fuels. The good news is that there is an effort to divest from these stocks. The management team has been gradually restructuring the index to remove stocks with exposure to fossil fuels.
EEMX tracks a portion of this index that focuses on 23 different emerging countries. It excludes investments in coal, oil, and natural gas.
However, you can gain exposure to sectors like metal and mining. Its often difficult to find funds that give you exposure to these sectors while excluding fossil fuel investments.
EEMX has a medium resiliency rating, which means that volatility is possible. However, its a good option if you want to invest in medium and large companies in different emerging markets while benefiting from a low expense ratio. Plus, you can gain exposure to the Asian market and to sectors like metal and mining without investing in fossil fuels.
What Is A Green Investment
Green investing, whether it pertains to ETFs, mutual funds, or individual stocks, refers to investment activity that focuses on companies whose business supports or promotes conservation efforts, alternative energy, clean air, and water projects, and other environmentally responsible business decisions.
The majority of green ETFs focus on companies involved directly or indirectly with the research, development, production, and provision of alternative energy. Companies may be distributors of alternative energy or manufacturers of parts and equipment needed to produce the energy, such as the photovoltaic cells necessary for creating solar panels. Each ETF has its own criteria for determining the eligibility requirements for assets.
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Dont Sleep On These Green Energy Etfs
BMO Clean Energy ETF launched on January 20, 2021. It aims to invest in companies that are involved in clean energy-related businesses. This involves tracking the S& P Global Clean Energy Index. Shares of this green energy ETF have plunged 24% in 2021. Meanwhile, it is up 10% compared to the previous month.
Some of the top holdings in this ETF include Enphase Energy, Vestas Wind Systems, and Plus Power. This ETF has major room to run, as the green energy space is set up for big growth over the course of the 2020s.
iShares S& P/TSX Capped Utilities ETF is the final green energy-related ETF Id consider snatching up in the first half of November. It offers investors exposure to some of the top utility companies in Canada. Shares of this ETF have increased 4.3% in the year-to-date period.
This fund boasts nearly 20% overall exposure to renewable electricity. Moreover, investors will recognize some top green energy names like Algonquin Power & Utilities, Brookfield Renewable Partners, and Northland Power. Moreover, the ETF also offers a monthly distribution of $0.082 per share. Indeed, that represents a 3.2% yield.
Fool contributor Ambrose OCallaghan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
Prepare For The Green Energy Boom With These Etfs
Canadian investors should look to funds like the Harvest Clean Energy ETF , as the green energy space gears up for big growth.
The 2021 United Nations Climate Change Conference, also known as COP26, is set to conclude at the end of this week. Meanwhile, the Justin Trudeau-led Liberals have made a variety of policy promises to combat climate change in the years and decades ahead. Back in October 2019, Id discussed how the sustained public push would fuel growth in this space. Today, I want to look at three exchange-traded funds that offers broad exposure to this fast-growing space.
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The Future Of Renewable Investing
While renewable energy already makes up a large proportion of the UKs energy supply, there is still plenty of scope for this to grow, increasing the viability of renewable energy investment.
Recently, there have been new commitments to green energy targets including reducing fossil fuels from nations including the UK ahead of the COP26 climate-change summit in Glasgow in November.
These include the EUs objective to achieve carbon neutrality by 2050 and the USs return to the Paris Agreement on climate change.
In order to meet these targets for radically reducing emissions, investment in renewable energy will need to continue. It could therefore be a sustainable investment strategy for anyone looking for long-term returns.
Renewable Energy History In The Us
Wood was the primary energy source in the U.S. until the mid-1800s, but a lot has changed since then. Fossil fuels like coal, petroleum and natural gas emerged as alternatives by the end of that century and continued to be the best bet for over a century.
However, the 1990s cast U.S. energy needs in a new light and led to the rise of renewable energy production and consumption. The use of biofuels, geothermal energy, solar energy and wind energy reached record highs during the COVID-19 pandemic in 2020.
Last year, electric power accounted for roughly 60% of the net U.S. renewable energy consumption. Moreover, up to 20% of total electricity generated in the U.S. came from sustainable sources.
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Canadian Etf Providers Look To Capitalize On Clean Energy Theme
New products missed the 2020 boom but have plenty of room to grow
Clean energy stocks had electrifying gains in 2020, as did the funds that hold them. Unfortunately, the three Canadian-listed clean energy ETFs missed out on a triple-digit year, launching just as the market became more challenging.
The Harvest Clean Energy ETF and the BMO Clean Energy Index ETF both launched in January, followed closely by the February debut of the First Trust NASDAQ Clean Edge Green Energy ETF. All three have been jolted by losses of 17% or more since inception as of March 31.
Valuations for clean energy companies had become rich, with estimated forward price-earnings ratios of more than 60 times, said Karl Cheong, head of distribution at Toronto-based FT Portfolios Canada Co., which operates as First Trust Canada. The companys ETF is a clone of the similarly named US$2.7-billion ETF, managed by an affiliate and listed in the U.S., which returned 184% in calendar 2020 and 42.7% the year before.
Though clean energy stocks were due for a correction, according to Cheong, the recent losses have created a more favourable entry point for investors who have a longer-term holding period. We really believe in this space. These companies will grow into those earnings over time, Cheong said. The outlook for clean energy is still very strongly positive if you can withstand the volatility.
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Lgim Expands Thematic Range With Clean Energy Etf Launch
Investment strategy allows investors to capture the growth potential of rising demand for green energy solutions
11 Nov 2020
Legal & General Investment Management has today announced the launch of the L& G Clean Energy UCITS ETF, which provides investors with exposure to the innovation and structural opportunities associated with the growing clean energy ecosystem. The strategy is listed on the London Stock Exchange, Deutsche Boerse, Borsa Italiana and the Swiss Exchange , and is available to UK and European intermediary and retail investors.
The L& G Clean Energy ETF expands LGIMs thematic exchange traded fund range, and is designed to invest in companies that are at the forefront of the United Nations Sustainable Development Goal 7, which aims to substantially increase the provision of affordable and clean energy by 2030.
Using a dynamic, actively designed investment strategy that leverages real-time data on more than 120,000 power-related tenders and contracts worldwide, the ETF delivers a specialised portfolio of companies across the clean energy value chain, providing a viable, sustainable alternative to the traditional, fossil fuel-dominated energy sector.
Leveraging GlobalDatas proprietary datasets and active research, the L& G Clean Energy ETF will utilise the Solactive Clean Energy Index NTR to capture the entire value-chain of the clean energy theme.
Notes to editors
About Legal & General
* at 30 June 2021
Heres A Clean Energy Etf To Buy On The Dip
Harvest Clean Energy ETF invests in a portfolio of the 40 largest Clean Energy Issuers selected from the Clean Energy Investible Universe. That includes equities listed in North America, Europe, and Asia. Meanwhile, the fund offers medium risk to prospective investors, according to its own quick facts.
Shares of this green energy ETF have dropped 16% in 2021 as of early afternoon trading on November 9. Moreover, the ETF is up 11% month over month. Some of the top holdings in this portfolio include the China-based firm China Longyuan Power Group, United States-based companies like Daqo New Energy, First Solar, and SolarEdge Technologies.
This ETF is trading in the middle of its 52-week range. It is worth snatching up at the time of this writing.
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Why Invest In Clean Energy Companies
The Natural Resources Defense Council highlights “clean energy comes from natural sources or processes that are constantly replenished.”
These low- or zero-emission sources include solar, wind, solar, water, hydroelectric, geothermal, or biomass energy.
In its Global Energy Review, dated April 2020, the International Energy Agency says:
“The share of renewables in global electricity generation jumped to nearly 28% in Q1 2020 from 26% in Q1 2019… Renewable energy has so far been the energy source most resilient to Covid19 lockdown measures.
Readers are likely to already be familiar with companies like Brookfield Renewable Partners , one of the world’s largest publicly traded renewable energy companies, Canadian Solar , a Canada-based solar power company, First Solar , one of the leaders in developing thin-film solar panels, and NextEra Energy , a generator of renewable energy from the wind and sun.
Clean energy may be used for providing electricity, powering electric vehicles , and in industry. Here are two exchange-traded funds that have seen solid momentum in 2020.
Best For Exposure To A Large Blend Of Us Equities: Spdr S& p 500 Fossil Fuel Reserves Free Etf
The S& P 500 Index reflects the performance of the top 500 publicly-traded companies in the U.S. The fluctuations of this index often reflect how the economy is doing as a whole.
You can gain exposure to this index via an S& P 500 index fund. These funds are a cornerstone of many investment strategies. There are several benefits to investing in an S& P 500 fund.
Youre investing in major companies, which means there is no extensive due diligence required. Fees are usually low, and youre getting broad exposure to the top-performing companies in the country.
There are different options to consider to add an S& P 500 index fund to your portfolio, like VOO, IVV, or SPY. However, all these funds also track stocks from companies involved in fossil fuels.
SPYX is an alternative that gives you exposure to most of the companies that make up the S& P 500 while excluding the businesses that produce fossil fuel. Its a slightly smaller fund with a little over 480 stocks instead of 500, but there are still $1.35 billion in assets under management.
However, the non-profit FossilFreeFunds.org estimates that around 4% of this fund gives you exposure to fossil fuels. Youre not completely avoiding fossil fuel investments with this fund, but its a much better alternative to options like SPY or VOO if you want exposure to the S& P 500 Index.
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The Top Renewable Energy Stocks Should Generate Strong Returns For Investors
Climate change and socially responsible investing are major catalysts for the clean energy revolution. Those factors will drive trillions of dollars of investment in renewable energy in the decades ahead.
While that rising tide should lift all boats, the top renewable energy stocks should generate some of the best returns for investors. These green energy companies have already proven to be value creators and have the financial strength to capture opportunities that should yield outsized total returns in the coming years.
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Best For Investing In Tech And Industrial Companies: Riverbridge Eco Leaders
This fund is smaller compared to the other investment vehicles on this list. We recommend RIVEX because its a fund that performs well and that has received high ratings. Morningstar currently has a four-star rating for this fund.
RIVEX gives you exposure to roughly 50 different companies.
There are different cap sizes for diversity, but youll find many major U.S. companies like Microsoft or Tesla. Youll also find stocks like Salesforce, Starbucks, or Amazon. The total weighted average market cap is $119.4 billion.
Overall, RIVEX offers a good mix for those seeking exposure to different sectors. There is an emphasis on tech companies that represent around 38% of the fund, and industry leaders that make up around 27% of the fund. Youll also get exposure to healthcare, a sector that accounts for around 14% of RIVEX.
The management team uses a screening process to choose companies with good ESG practices. Overall, this fund is a great way of diversifying your portfolio while adding exposure to major U.S. companies.
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Vaneck Vectors Oil Services Etf
As the name suggests, this ETF deals with oil. More specifically, the fund includes companies that deal with everything surrounding oiloil equipment, drilling, and exploration. The VanEck Vectors Oil Services ETF has $617.4 million in AUM and focuses primarily on U.S. companies, although it also includes some foreign companies that trade on the U.S. market.
As of this writing, the ETF has been trading at $12.95 a share. The fund mirrors the performance of its underlying index, the Market Vectors U.S. Listed Oil Services 25 Index. Its also worth noting that the fund is highly concentrated: one-third of the fund is comprised of the two largest companies in the fund, Schulmberger and Halliburton. Its experienced a one-week return of 13%, but keep in mind that its year-to-date return has been -6.20%.
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