- There is a sea of opportunities present for investors in the clean energy space.
- ETFs are managed by professional asset management companies that oversee investment choices, capital allocation, risk parameters, etc.
- CLNE, HGEN and GRNE are some of the ASX-listed thematic ETFs for clean energy space.
With the world rushing to slash carbon emissions, the clean energy sector is exploding in popularity, and it is set to become one of the hottest sectors to invest in the coming years. Australia being a commodity-centric economy which uses coal in 75% of its energy production, has also pledged to cut down its carbon footprint by 2030.
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There is a sea of opportunities present for investors in the clean energy space; however, most retail investors face one common dilemma -- which companies to bet on? Although the sector itself is poised to grow in the coming years but a common fact is not all companies will grow at the same pace, and some might even go against the grain due to stiff competition or other reasons.
One of the best ways to overcome this dilemma is to pick up a ready-made portfolio of handpicked companies that have a potential to capitalise on future growth. These portfolios are essentially called managed funds or to be specific, exchange traded funds (ETFs).
ETFs are managed by professional asset management companies that oversee investment choices, capital allocation, risk parameters, etc. Investors can buy units of these funds (just like shares of a company) and get exposure to the underlying stocks. Let us have a look at some of the ASX-listed ETFs which specifically focus on the clean energy theme.
- VanEck Global Clean Energy ETF (ASX:CLNE)
Launched by VanEck, the ETF is designed to meet the growing demand for companies that cater to the renewable energy sector. CLNE tracks the S&P Global Clean Energy Index, providing an opportunity to investors to replicate the same returns for their portfolios.
The ETF holds a total of 120 holdings in its portfolio and its funds under management (FUM) currently stands at $107.7 million. Since its inception last year, the ETF has delivered a total return of negative 5.86%, compared to negative 5.63% return delivered by its benchmark.
- ETFS Hydrogen ETF (ASX:HGEN)
ETFS Hydrogen ETF invests in some of the leading pure-play hydrogen companies in the world. Hydrogen can release up to 200% more energy than petrol when compared on a weight-for-weight basis. At the same time, hydrogen does not produce carbon dioxide, making it a much cleaner and economical alternative to petrol.
The ETF tracks the performance of Solactive Global Hydrogen ESG index and holds 30 companies in its portfolio. The fund holds AU$83.64 million in FUM and has a management fee of 0.69% per annum. Since its inception last year, the ETF has delivered a 2.38% return.
- VanEck MSCI Australian Sustainable Equity ETF (ASX:GRNV)
Another ETF by VanEck, this one invests in sustainable Australian companies with high Environmental, Social and Governance (ESG) performance. Neither do these companies hold any fossil fuel reserve, nor do they derive their revenue from mining thermal coal or oil and gas exploration.
The ETF tracks the performance of MSCI Australia IMI Select SRI Screened Index and holds around AU$100.7 million in FUM and has 400 companies in the portfolio. Since its inception in 2016, the ETF has delivered a net return of 8.27% per annum.