Clean Energy Investment
Overview of investing in Clean Energy
Human demand for energy is growing at a faster rate than new facilities are opening to generate this power. Fossil fuels often come from politically unstable regions and problems of extraction and global demand are set to push up prices at a faster rate than inflation. At the same time scientists are warning that burning fossil fuels is causing the climate to warm with huge implications to society. Governments around the world are all responding to these pressures and legislation is shifting to favour renewable energy companies over their competitors.
The UK target is for 20% of energy consumption to come from renewable sources by 2020, this includes wind, solar, biomass, hydroelectric and geothermal power. This approach is being taken by many governments, including China.
How clean energy funds are managed
Investment funds invest directly in companies generating renewable energy, as well as those involved in the production of plants, and distribution of energy. Companies providing energy efficiency, both for buildings and industry, are an important part of this theme.
Investment funds within the clean energy theme take a different approach on what can be included within a ‘clean’ energy fund. Some investment funds include technologies which reduce carbon emissions today, but are not without environmental challenges in the future such as natural gas and nuclear.
Investor approach to investing in Clean Energy
The clean energy theme is high in people’s minds and dominates the news. The demand for energy is likely to far outstrip supply and thus it would seem obvious that investment in clean energy must result in above market returns. But this has not been the case to date.
Indeed clean energy invetment has severely underperformed equity markets and been extremely difficult to make money in. Investors therefore need to be careful. Looking to the future, this could be the Cinderella of the themes, but to date Cinderella has not met the fairy godmother.
Clean energy companies have been high growth companies but their profits have been squeezed by competition from developing economies, particularly Chinese manufacturers and in some cases reductions in government tariffs. It is the very policy which drives the clean energy markets which also caps and limits listed company profits.
Clean Energy Investment funds
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The value of ethical and green investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks of investing. Our aim is to provide you with the best information we can to help you make decisions about ethical and green investments. It is not to advise you on the suitability of an investment to your personal circumstances. Nothing written on the site should be considered personal advice, nor do Holden & Partners accept liability for any inaccurate information on the site. If you are unsure about the suitability of an ethical and green investment please contact Holden & Partners or your financial adviser.