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Investing in green energy

Green energy investing typically spans a variety of renewable energy sources, including solar, wind and water energy. Some investments focus less on renewable energy projects and more on green-tech companies that provide technologies for renewable energy solutions.

An investment solution that gives access to this area is green energy investment funds. In recent years, these have risen strongly in popularity on the back of strong interest among investors for environmentally friendly investments linked to the green transition. It is not only among retail investors that interest in green 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 spend $743bn on renewables in the next decade.

There are different types of investment strategies that give exposure to green energy. An investor can invest in the companies that generate energy, build the technology, or extract the metals and resources needed to make the technology. For example, investing in green energy can be achieved via funds that invest in metal mining companies. Many metals are indispensable in developing technologies needed for a green transition. For example, several metals, including copper, lithium and cobalt, are used in electric vehicle batteries. Gold, and particularly silver, has wide industrial usages linked to technologies that are needed for the green transformation, including solar panels and electric vehicles.

Which are the different types of funds that invest in green energy?

Before making a decision on which green energy funds to invest in, it is important to understand the different types of funds. The two most common fund types are daily traded funds, and exchange traded funds:

  • Daily Traded Funds - Are often actively managed by a professional portfolio manager. This alternative suits investors that do not have the time or experience when it comes to selecting the best stocks. Daily traded green energy investment funds offer exposure to green energy through investments in portfolios of companies linked to this industry. By investing in green 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 investing funds and green energy investing funds. Investing in funds provides investors with an effortless way to invest in green energy.
  • Exchange Traded Funds (ETFs) - tracks 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 start investing in green energy, there are ETFs that track a number of sector indices. While ETFs can be a straightforward way to get exposure to these companies, it is crucial to understand the fees and exactly what the ETF is tracking before you invest.

After selecting which type of fund an investor need to choose the type of exposure towards green energy. The most common types of green green energy investment funds are described further below:

  • Energy Funds - invest directly in the companies that generate green energy.
  • Green Technology Funds - invest in the companies that develop the technology needed to create green energy, such as solar panels and wind turbines.
  • Metals mining funds – invests in the companies that extract the metals needed to create green technology. Examples of these metals are: Silver, Copper, Lithium, and Rare earth metals. An allocation to a mining fund can be an indirect way of investing in funds that invest in renewable energy.

There are multiple green energy funds to invest in, and the easiest way to find them is to go to your investment platform and search. Many platforms often have separate lists with type of funds.

Which are the different types of green energy companies to invest in?

The future for green 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 green energy will need to continue. Therefore, investing in green energy companies could be a sustainable investment strategy for anyone looking for long-term returns.

There are numerous listed green 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 green energy companies if the investor does not look for exposure in individual stocks. Here are some types of green energy companies:

  • Biomass
    • Wood and wood waste
    • Municipal solid waste
    • Landfill gas and biogas
    • Ethanol
    • Biodiesel
  • Hydropower
  • Geothermal
  • Wind
  • Solar

Why invest in green 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 transition to a green world – trends that are highly topical today.  

  • Through investments in AuAg Precious Green, which can be considered a green energy investment fund, the investor, gets access to both the mining companies that extract the metals needed for electric vehicle batteries, but also companies that develop the technology needed to create and store green energy.

  • AuAg’s funds fit well into a portfolio of traditional assets as they have a low correlation with equities in particular.  

  • AuAg are investing in 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 green energy, reduced energy consumption, energy storage/power and extraction of the elements needed for the green transition.

FAQ

How do you invest in green energy?

Investors can access green energy through individual stocks, funds or ETFs. These can be accessed via personal brokerage accounts through a bank or trading platform.

What is the best form of green energy?
The most efficient forms of renewable energy are geothermal, solar, wind, hydroelectricity and biomass. Biomass has the biggest contribution with 50%, followed by hydroelectricity at 26% and wind power at 18%.

How do you identify green investments?
You can access a broad range of green investments through green energy funds. Another way is to look at the positions underlying these funds to see how they define the space and what companies they think are the most interesting.

Which oil companies are investing in green energy?
According to GlobalData’s Integrated oil & gas Thematic Scorecard, BP, Equinor, Repsol, and PKN Orlen are the companies best positioned to benefit from investments in renewable energy.

Which countries invest the most in green energy?
According to visualcapitalist.com, China, the US, Germany, the UK, and France are investing the most in the energy transition.

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