Investing for now and the way beyond
An example of the latter category – a broadly diversified approach – is our Invesco Global Clean Energy UCITS ETF, which we launched in March this year. The ETF tracks the WilderHill New Energy Global Innovation Index, following the performance of companies focused on the generation and use of cleaner energy, energy conservation, efficiency and the advancement of renewable energy. This was the world’s first index to provide diversified exposure to the clean energy theme.
The index, and therefore our ETF, currently has more than 120 stocks, comprising a mix of large, medium and smaller companies, with just over 30% in North America and around 44% in Europe. The thematic exposure is also broad, with each company focussing on one of seven clean energy sectors. And by equally weighting each of those companies, the largest names don’t dominate and each of the constituents can provide a meaningful contribution to overall returns.
Solar and wind might be the better-known clean energy sources, but others are becoming increasingly viable from economic and efficiency perspectives. The list includes biofuels and biomass, thermal, hydro, wave and tidal generated power. Green hydrogen will also become an important part of the global solution, especially in shipping and other long-haul industries.
Generating clean energy is just half of the story. You also need to be able to store that energy effectively and, to do that, we need improvements in battery technology. Beyond that, there are companies focussed on improving the use of energy through conservation and efficiency solutions. Others may evolve over time, and investors need an approach that can effectively gain exposure to these opportunities as they arise.
Conclusion
Climate policy around the world is driving an accelerating shift to clean energy with very ambitious targets. Over the past year, we’ve seen unprecedented commitments from major economies to reach net-zero carbon over the next 30-40 years and interim targets to make sure they’re kept on track. Huge investment in clean energy technology will present opportunities. This is not just a story for the future, however; it’s happening now. Solar and wind power in particular have already made huge strides with economic improvements making them among the cheapest sources of energy. This is only the beginning – the tip of the iceberg – and today’s investors have an opportunity to capture long-term growth potential as part of their wider ESG strategy.
Footnotes
1 Source: IRENA, 2019.
2 Source: https://www.ucsusa.org/resources/each-countrys[1]share-co2-emissions
Investment risks
The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
As this fund invests primarily in small-sized companies, investors should be prepared to accept a higher degree of risk than for an ETF with a broader investment mandate.
The value of equities and equity-related securities can be affected by a number of factors including the activities and results of the issuer and general and regional economic and market conditions. This may result in fluctuations in the value of the Fund.
Investments into the clean energy sector are considerably exposed to investment trends focused on environmental factors and may have sensitivities towards ESG related government regulations and tax implications.
Important information
All investment decisions must be based only on the most up to date legal offering documents. The legal offering documents (fund and share class specific Key Investor Information Document (KIID), prospectus, annual & semi-annual reports, articles) are available free of charge on our website here and from the issuers or relevant information agent.
