Tuesday 21 March 2023

iShares Global Clean Energy ETF - Update

This exchange traded fund, launched in 2007, gives investors an opportunity to invest in a range of globally diverse companies involved in renewable energy. The fund joined my portfolio in March 2019 at 433p and has been topped up on a couple of occasions.

It is an index fund and tracks the S&P Global Clean Energy Index which has been expanded to allow up to 100 holdings and a methodology which provides a greater weighting to more liquid stocks.

Why Clean Energy?

The invasion of Ukraine, surging oil and gas prices combined with a growing realisation of the threats posed by climate change has ramped up the demand for renewable energy. Of course, this has boosted the demand for funds which can offer investors some exposure to this sector.

The introduction of the Inflation Reduction legislation in the US will provide $369bn for climate solutions and clean energy programmes so I believe the long term prospects are positive. Current estimates suggest they are on track to provide over 60% of generation from renewables by 2030 (currently 22%). According to analysis from Ember, the EU they expect to exceed their 40% target by the same date and current projections are between 45% - 50%. The dials are certainly shifting.

Unfortunately we are just not moving that dial with sufficient speed. In 2021 we had the ‘Code Red for Humanity’ report from the IPCC.  Now we have their latest report (and main points follow-up) with a dire final warning to act now or it will be too late to avert a climate disaster. 

"There is a rapidly closing window of opportunity to secure a liveable and sustainable future for all," the report states. Clearly “clean energy and technology can be exploited to avoid the climate disaster”.

The use of fossil fuels account for three-quarters of greenhouse gas emissions so we need to transition to alternative, cleaner forms of energy asap. Fortunately we already have the solutions - renewable clean energy such as wind, solar, hydro and tidal stream is cheaper than fossil fuels and can be rolled out at scale globally so the only question to be answered is what is standing in the way?

(click to enlarge)


The ETF fund holdings include :

Plug Power (2.7%) a leading provider of fuel-cell engines and green hydrogen-based solutions in the US. Some high profile customers include Amazon, BMW, IKEA, Walmart and Carrefour.

Enphase (7.7%) a global energy technology company and the world’s leading supplier of solar microinverters. these connect solar generation, storage and management on one intelligent platform.

First Solar (8.3%) a leading global provider of PV solar energy solutions based in Arizona and first listed on Nasdaq in 2006.

Solaredge Technologies (7.0%) another Nasdaq-listed US company providing inverter solutions across all segments of the solar PV market. 

Vestas Wind (4.5%) and Orsted (3.0%) leading global renewable energy operations with a main focus on offshore wind.

Iberdrola (6.2%) one of the leaders in global renewable energy and aiming for 50GW capacity by 2025.


The fund had an amazing run...a couple of years back it moved from under £4.00 in March 2020 to reach a high point of £14.00 in mid February 2021...happy days... but then a significant pull-back over the following year with the share price falling to a low point of 740p by early 2022. The share price has become a little more stable over recent months and has just dipped below the 900p in the past few days due to the fallout from SVB and Credit Suisse. Total return over the four years since purchase is 106%.

INRG 3 yr share price

Clearly the decision by Putin to invade Ukraine last year sent shock waves around the world. It highlighted how dependent the West had become on Russia’s oil and gas. We know we need to move away from fossil fuels to address the climate crisis and this ongoing crisis just adds more urgency to the need to move to alternative forms of clean energy. The EU has urgently reviewed its energy security strategy and is speeding up the transition to clean energy alternatives.

I have taken a punt on several individual companies held in this fund in recent years - Orsted, Plug Power, Vestas Wind, Enphase etc. - but most are now sold and I think a diversified approach for exposure to this sector with the likes of this ETF probably makes more sense so I am very happy to continue holding these shares which currently make up a significant percentage of my green portfolio.

I am expecting more volatility - the holdings are all equities after all - so a good degree of patience will be required to have the best chance of a decent return over the longer term.

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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