Invest in clean energy
Clean energy investments often focus on investing in renewable energy sources, such as solar, wind, and water. There are different alternatives for investors who want to get exposure to this growing sector.
There are two common ways of investing in clean energy. The first one is investing directly in the companies that build green energy technology. This can be achieved by buying stocks. The second alternative is to invest in funds with a portfolio of companies active in the clean energy sector.
Clean energy investment funds have risen in popularity in recent years due to increasing interest among investors in environmentally friendly investments linked to the green transition. It is not only among retail investors that interest in clean energy investments has grown. Also, institutions are putting vast amounts of money into the sector. A recent survey from the alternative investment manager Octopus found that they plan to invest $743bn into renewables in the next decade.
Clean energy investment funds invest in various renewable energy sources, including solar, wind and water energy. Some funds focus less on renewable energy projects and more on green-tech companies that provide technologies for renewable energy solutions.
An investor can also indirectly get exposure to clean technology by investing in the metals and metals mining companies needed to make the technology. Many metals are indispensable in developing technologies required for a green transition. For example, several metals, including lithium and copper, are used in electric vehicle batteries and wind turbines. Gold, and particularly silver, has wide industrial usages linked to technologies that are needed for the green transformation, including solar panels and electric vehicles.
Different types of clean energy investment funds
There are different ways of accessing clean energy investment funds that benefit from renewable energy trends:
- Clean energy investment funds – daily traded funds that offer exposure to renewable energy through investments in portfolios of companies linked to this industry. By investing in clean energy funds and adding them to an investment portfolio, the investor gets exposure to a broad range of companies that benefit from the green transition. Other funds with similar properties as renewable energy investment funds are green investment funds and clean energy investing funds. Funds provide an easy access point for investors who want to invest in green energy.
- Exchange-Traded Funds (ETFs) - track the price movement of certain baskets of stocks, such as the FTSE 100. They allow you to gain exposure to a diverse portfolio of stocks and are also very liquid, meaning you can buy and sell them easily. For investors that want to invest in clean energy, there are ETFs that track a number of sector indices. While ETFs can be a straightforward way to get exposure to these types of companies, it is important to understand the fees and exactly what the ETF is tracking before you invest.
- Metals mining funds – by investing in companies that extract metals indispensable for the green transition, these funds offer broad indirect exposure to the industry. The miners' stock prices are linked to the prices of the metals and therefore show a low correlation to the overall stock market and offer exposure to the demand for green metals. So, an allocation to a mining fund can be an indirect way of investing in funds that invest in renewable energy.
Different types of clean energy companies to invest in
The future for clean energy companies looks bright, underpinned by a structural shift in demand that will favour renewable energy projects. Demand-side growth is also well-supported by ambitious commitments from the EU. These include the EU's objective to achieve carbon neutrality by 2050 and the US's return to the Paris Agreement on climate change.
To meet these targets for radically reducing emissions, investment in clean energy will need to continue. Therefore, investing in clean energy companies could be a sustainable investment strategy for anyone looking for long-term returns.
There are numerous listed clean energy companies to invest in. These companies typically provide technological solutions to facilitate the transition to a green economy. Renewable energy funds give broad exposure to clean energy companies if the investor does not look for exposure in individual stocks.
Why invest in clean energy with AuAg?
- AuAg Funds offers metal mining investment funds that focus on providing exposure to precious metals and elements in green technology. What these metals have in common is that they provide protection against monetary inflation and are necessary for the transformation to a green world – trends that are highly topical today.
- Through investments in AuAg's clean energy investment fund, AuAg Precious Green, investors get access to both clean energy technology companies and mining companies that extract the metals needed for the green energy transition
- AuAg's funds fit well into a portfolio of traditional assets as they have a low correlation with equities in particular.
- AuAg offers exposure to green technology companies through the fund AuAg Precious Green. The fund has 60 per cent of the fund's exposure to green tech companies in four different areas; production of clean energy, reduced energy consumption, energy storage/power and extraction of the elements needed for the green transition.