Monday, 22 March 2021

iShares Global Clean Energy ETF - Update


This exchange traded fund gives investors an opportunity to invest in a range of globally diverse companies involved in renewable energy.

It is an index fund and tracks the S&P Global Clean Energy Index which is made up of 30 of the worlds leading companies in the clean energy sector.

Why Clean Energy?

It is estimated that at least 50% of the world's energy will come from renewables such as solar and wind by 2050. This compares to around 7% just 6 years ago. In order to implement the Paris Agreement and limit global warming to well below 2C, governments around the world will need to invest huge amounts of capital - estimated over $3 trillion - over the coming decade and this obviously provides significant opportunities for the renewables industries.

Climate change and scarcity of resources is one of 5 megatrends identified by Blackrock which will shape the future.

The fund was added to my green portfolio in March 2019, shortly after I put my index funds under the spotlight and decided to move my portfolio away from fossil fuels. My initial purchase price was 433p and I topped up my holding during the Covid sell-off last March at 435p. The shares are held in my SIPP drawdown and also my ISA with AJ Bell Youinvest.

Fund Holdings

The ETF fund holdings include :

Plug Power (8.5%) a leading provider of fuel-cell engines and hydrogen-based solutions in the US. Some high profile customers include Amazon, BMW, IKEA, Walmart and Carrefour. The share price has grown rapidly over the past 12 months - under $4 last March to currently $39.

Enphase (5.8%) a global energy technology company and the worlds leading supplier of solar microinverters. these connect solar generation, storage and management on one intelligent platform. 

Solaredge Technologies (3.7%) another Nasdaq-listed US company providing inverter solutions across all segments of the solar PV market.

Vestas Wind (4.1%) and Orsted (4.1%) both of which I also hold as stand-alone holdings in my green portfolio.

Siemens Gamesa (4.6%) a Spanish-based renewable engineering company involved in the manufacturing of wind turbines and related servicing. Their products have been installed in over 90 countries all around the world with a current combined capacity of 100GW.

Returns

The fund had an amazing run over the past year moving from £4.00 last March and reaching a high point of £14.00 in mid February 2021 but there has been a significant pull-back over recent weeks with the share price falling back around 30%. At the current price of 985p my total return has been 127% for the year including dividends of 5.7p which gives a yield of 0.6% and subject to exchange fluctuations.

One Year Share Price INRG v RDSB
(click to enlarge)

I am hoping the set back in recent weeks is a temporary correction after such a good run but this is an emerging sector and I am prepared for some further volatility. However, over the longer term, my view is that the global renewable energy sector is likely to see continued growth as the world attempts to address the climate crisis and move to curb carbon emissions. We are weaning our economies off fossil fuels and the transition to clean energy such as wind, solar and wave power is well underway and likely to accelerate. As can be seen from the chart above, the global renewables represented by INRG has performed much better than the oil sector represented by RDSB.

I have taken a punt on a few individual companies such as Orsted, Ceres Power and Vestas Wind, Enphase and Plug Power for example but a diversified approach with the likes of this ETF probably makes more sense so I am very happy to continue holding these shares which currently make up around 10% of my green 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!

3 comments:

  1. Thanks for this diy.

    Yes, the correction was a bit disappointing (overweight in Plug Power?) but I took the opportunity to top up my holding with a long term view.

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    Replies
    1. Hi weenie,

      Yes, with only 30 shares and rebalance every 6 months, it's likely the SP has become volatile with a pull-back in the likes of Plug Power which was just $15 at the time of the last rebalance, then went up quickly to over $65 earlier this year before falling back.

      I think if INRG had progressed steadily from £4 to £10 over the year we would be happy but unless the index changes to include more holdings then it is likely to remain volatile compared to a global index with 2,000 holdings for example.

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  2. It looks like the tracker will expand to at least double the number of shares but this will still be woefully small compared to the bigger global indexes. Bumpy road ahead!

    ReplyDelete