Wednesday, 20 March 2019

iShares Global Clean Energy - New Addition


I was reminded of this ETF in a comment to my article last month My Global Index Funds Under the Spotlight. I placed it on my list for further research. I think I may have looked at it some time back as the ticker INRG is familiar but must have dismissed it as the performance would have looked below par until recently.

As the name indicates, this is a fund which has a focus on sustainable energy such as wind, hydro and solar. The ETF tracks the S&P Clean Energy Index.

It has just 30 holdings which include some of the big players in renewable energy from around the world.

The Case for Renewables

In just the past few years, the landscape for renewable energy has changed quite dramatically. The big driver behind these changes is the growing threat posed by climate change and the realisation that we need to dramatically reduce global CO2 emissions. One of the most important steps we can take to minimise the effects of climate change is to find reliable, affordable sources of power that can be used by everyone around the world without generating greenhouse gases. This means clean electricity and we need to continue to find better ways to store and transmit this form of energy.

It's not too difficult to imagine a world in the not too distant future when just about everything is run on renewable electricity. Here's an interesting research article produced for Bill Gates' Breakthrough Energy.

In Germany, many homeowners are installing a combination of roof-top solar with battery storage. Around 50% of all new orders for solar PV also include storage. This makes a lot of sense because it's very inefficient to feed this energy into the national network. (article link).

Here in the UK we have seen a big increase in wind and solar. Just last week I noticed from MyGridGB site that wind power was generating over 40% of our energy one windy day.

Many of the companies involved in the transition to a more sustainable world energy transition are featured in this global ETF and this provides an opportunity for me to tap into this sector whilst at the same time being broadly diversified and therefore not too exposed to any single company.

Holdings

Here are some of the larger holdings in the fund:

CEMIG - based in Brazil and engaged in electricity production from hydro-electric and wind farms and responsible for generating around 12% of the country's distribution.

Vestas Wind - A global leader in wind, responsible for the design, manufacture, installation and servicing of wind turbines in 80 countries worldwide. They are responsible for installing more wind power than any other company.

Siemens Gamesa - based in Spain and involved in the manufacture of both onshore and offshore wind turbines. Their mission is to become a global leader in the renewable energy industry driving the transition to a sustainable world.

Pattern Energy - the largest wind power generator in Canada and currently building the largest wind farm in USA

First Solar - a global provider of PV solar energy solutions. They provide the latest technology solutions which are an increasingly economically attractive alternative to fossil fuels electricity generation.

Verbund - Austria's largest electricity supplier, some 90% of which comes from hydropower. It also operates several wind farms in Austria, Romania and Germany.

Performance

The fund was launched in 2007 and was hit hard by the crash of 2008/09 losing 50% of its value within the first 18 months. Progress since then has been slow and total return for the past 5 years is just about break-even. However, there has been some signs of life in the past few months and the shares are ticking up 18% since the start of this year.

INRG Shares past 3 years (click to enlarge)

I am hoping this will continue over the coming months and years as we see the inevitable transition from fossil fuels such as coal, oil and gas towards clean energy and a more sustainable global energy system.

Ongoing charges are 0.65% and the yield is around 2.5% depending upon exchange rates. My purchase price was 433p and the ETF is held in my SIPP portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

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