From solar power to wind and geothermal energy: Are renewable energy sources interesting for investors? This moneyland.ch guide summarizes the most important things to look at before investing in renewable energy.
The move from fossil fuels to renewable sources of energy has – along with climate change – been a prominent topic of discussion for some time now. Wind, water, and solar energy can also be interesting from an investment standpoint. This moneyland.ch guide answers the most important questions about investing in renewable energy.
What is renewable energy?
The term renewable energy is used to denote sources of energy that remain available to humankind on an ongoing basis, without being exhausted. Renewable energy is the opposite of fossil fuel energy, as fossil fuels are either exhaustible or would hypothetically require huge lengths of time to regenerate.
Examples of renewable energy sources include:
Fossil fuels, on the other hand, include coal, petroleum, and gas.
What makes renewable energy an interesting investment?
Renewable energy sources generally have a much lower CO2 footprint than fossil fuel energy sources. Because of this, they are considered a cornerstone of sustainability. Many experts believe that the importance of renewable energy will continue to increase. By investing in renewable energies, you are investing in a sector with the potential for strong future growth that has long moved from niche to mainstream.
Investing in renewable energy is also popular among investors who place a strong emphasis on ethical investments or sustainable investments. In this case, the returns earned on the investment play a secondary role.
Which ETFs can I use to invest in renewable energy?
Exchange-traded funds (ETFs) enable you to invest in a whole basket of different stocks. The shares of these funds are traded on stock exchanges just like those of companies. You can buy and sell ETF shares at any time during trading hours using a stockbroker.
There are many different renewable energy ETFs. A number of relevant examples are shown in the table below. These ETFs passively replicate specialized stock indexes. These indexes track the performance of select stocks of companies that design, manufacture, and distribute products and services linked to renewable energies.
It is important to note that the ETFs included in the table only invest in the renewable energy or clean energy sectors as a whole. But there are many other ETFs that focus on just one specific type of renewable energy. Examples include ETFs that specialize in bioenergy, solar power, or wind power.
Can I invest in Swiss renewable energy companies?
A number of Swiss companies are active in the renewable energy sector. But you should be aware that when you invest in just a few individual stocks, your risk of losing money is higher than when you invest in a diversified stock portfolio (using an ETF, for example).
With the exception of Meyer Burger, the companies listed in the table are also included in one or more renewable energy stock indexes. The table may not include all companies in this sector.
Are there any risks and disadvantages I should be aware of?
Investments in securities like stocks and ETFs always come with a risk of loss. It is important to understand that you can make a loss on your investment.
There are certain other risks that are more specific to investments in renewable energy. These include:
Are there alternatives to stocks and ETFs?
Stocks and ETFs are not the only options for investing in renewable energies. Other possible ways to invest include:
How well do renewable energy investments perform?
There is no sure way to predict how an investment will perform in the future. Theoretically, both major losses and high gains can occur at any time.
Historical performance can serve as a point of reference, though it does not indicate future performance. A comparison of the historical performance of a renewable energy ETF and a global stock ETF shows that the renewable energy sector had weaker performance than the market as a whole. The performance, in Swiss francs, was negative over the five-year and 10-year periods used for the comparison.
Disclaimer: This article is provided for informational purposes only, and should not be considered investment advice. The publisher does not accept any liability in connection with this publication.
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