Investing in global clean energy

hansoudshoorn
Hans Oudshoorn

Summary:  How can you invest in renewables? Hans Oudshoorn looks at two funds that could be of interest should you want to diversify your investments into clean energy.


Level: Any experience


Now that the sun is shining brightly, the solar panels in our homes, our neighbourhoods and throughout the rest of the Netherlands are working at full capacity. Given the growing number of discussions surrounding climate change, even within the political sphere, this is a great way of contributing towards a cleaner environment. The impact of climate change – from forest fires to floods – is becoming increasingly evident. In other words, we are now faced with significant challenges and this is especially true in light of the substantial expected growth of the global population.


Population growth and urbanisation: pressure on the feasibility of the Climate Agreement

The website Worldometer provides a wealth of interesting data. For example, they estimate that the global population will grow from 7.8 billion in 2020 to around 9.75 billion in 2050. One demographic also set for a sharp increase is the number of city dwellers. Today, 56% of the world’s population lives in cities, whereas, by 2050, this figure will exceed 68%. However, all these people will want to continue breathing clean air.

In their World Energy Markets Observatory report, Capgemini has outlined a number of challenges posed by population growth and increasing urbanisation. They foresee, for example, an increase in the interweaving of geopolitical tensions and energy concerns. For example, while the US used to purchase large quantities of oil from Saudi Arabia, among others, today it is producing increasing quantities of shale oil. Besides potentially reducing global oil prices, this newly tapped resource may also reduce the demand for Saudi Arabian oil, thus affecting mutual (trading) relationships.

In addition, the International Energy Agency predicts that greenhouse gas emissions – following a temporary pandemic-induced dip – will increase significantly and (may) jeopardise the feasibility of the current Climate Agreement. To turn the tide, renewable energy – biomass, hydropower, wind, solar and geothermal energy – will (need to) become the fastest growing sector. This will provide opportunities for investors.


Investing in the ‘clean energy’ sector with international diversification

Those wishing to increase their exposure to clean energy – also known as renewable energy or ‘renewables’ – can do so via a wide range of options on the Frankfurt stock exchange with the iShares Global Clean Energy UCITS ETF (ISIN: IE00B1XNHC34). A second opportunity is listed on the Paris stock exchange in the form of Lyxor New Energy (DR) UCITS ETF (ISIN: FR0010524777). Both physically invest in global equities in the ‘renewable energy’ sector, in the broadest sense of the word. The iShares ETF currently holds 82 stocks, while the Lyxor ETF holds 40. There is some overlap in terms of investments, with NextEra Energy, Iberdrola, Ørsted and Enphase Energy, among others, featuring in both underlying portfolios. However, there are also differences. For example, Lyxor’s fund includes Schneider Electric, whereas iShares’ fund does not. Overall, iShares’ ETF clearly offers a wider spread for only 0.05% higher annual costs.

In terms of fund performance, both funds do what they are supposed to: follow the benchmark except when it comes to friction costs. iShares follows the S&P Global Clean Energy Index, while Lyxor follows the World Alternative Energy Total Return Index. Based on its performance, iShares scores a respectable three stars from Morningstar, and Lyxor achieved four.

What else? Lyxor scores remarkably well in Morningstar’s Analyst Rating&trade, achieving a ‘Gold’ rating. Both also invest in stocks that score well when it comes to corporate sustainability and have a smaller carbon footprint than their peers. Overall, iShares receives four globes with regards to the Morningstar’s Sustainability Rating™, and Lyxor receives five.

And the dividend yield? This stands at around 0.65% per annum for both titles. iShares usually pays out in May and November, while Lyxor usually does so in July. Please note, however, that the value of your investment can fluctuate. Past results are no guarantee for future performance.

At a glance, both titles are of interest for long-term investors who are able and willing to bear equity risks, while equally seeking to accrue sustainable assets with a clear conscience. Want to know more about ETF’s? Click here for the iShares title and here for Lyxor’s.


Investing carries risks. Your deposit may depreciate.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • 350x200 peter

    Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • 350x200 althea

    Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • 350x200 peter

    Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • 350x200 charu (1)

    FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • 350x200 ole

    Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.