An investment in renewable energy offers an excellent financial return and a way to put your money to work for people and the environment. Sustainable energy investments also play a crucial role in tackling the global climate problem.
• Different forms of renewable energy each have their advantages and disadvantages.
• The climate problem requires significant investments.
• Investing in a mix of renewable energy investments spreads the risk.
• Future Energy Fund invests in wind, solar, and hydrogen.
Renewable energy investment: many options
Those who wish to invest in green energy have various options. For instance, they can buy solar panels for their homes or invest directly in solar energy projects. In addition, they could buy shares on the stock market in companies that supply renewable energy or develop renewable energy technology. Moreover, there are many types of sustainable energy, such as:
• wind energy
• solar energy
• geothermal energy
These forms of energy each have their advantages and disadvantages. All these forms are still in the development stage, but with time they will inevitably become more efficient, and therefore more profitable.
Investments needed to combat global warming
There are technological challenges in the production of energy and its storage and transport. This requires investments, not only from governments but also from investors. These investments are badly needed to make the transition to a sustainable energy supply, which is necessary to combat global warming. Investors can make a valuable contribution to this and at the same time achieve a financial return.
Investing in which renewable energy?
First-time investors will first have to ask themselves which sustainable energy they want to invest in. Wind and solar power are currently in the lead. Both wind turbines and solar collectors have made significant progress in improving profitability. Biomass is not uncontroversial; critics warn that it is an attack on forests. Hydrogen is still in its infancy, but it is a promising renewable form of energy generated from sustainable resources (green hydrogen).
Nuclear energy, a risky alternative
Nuclear energy is increasingly cited as a solution in the sustainable energy transition, but it remains a risky option. Think of Chernobyl and Fukushima. Do we want to run those risks when safer, sustainable alternatives such as green hydrogen are available? The social debate on this is ongoing. In addition, nuclear energy is not a cheap form of energy and requires heavy investment.
Guidelines for first-time investors
Investors who want to invest in sustainable energy can buy shares in a large number of companies. However, it isn't easy to choose the right one. There are a few selection guidelines. Firstly, the region where a company is active: some areas are more sustainable than others. Regulations and government policies also play a role. But above all, investors have to assess the financial strength of companies before investing in them.
Some leading companies in renewable energy
Danish company Vestas Wind Systems has wind turbines on all continents, some 77,000 turbines in total. Wind is an essential alternative to fossil fuels. The value of Vestas' order portfolio for wind turbines at the end of June was €21.2 billion. In addition, the company has fixed service contracts with expected revenues of EUR 26.9 billion, and thus stable cashflow.
Evergy is a Kansas City-based electricity company that saw rapid growth in 2021. Net profits rose to $376.9 million in the first half of the year from $202.8 million a year earlier. Earnings per share even doubled. Half of the energy Evergy supplies to 1.6 million customers comes from emission-free sources. As a result, Evergy is a good choice for investors looking to put their money into clean energy.
Renewable Energy Group produces biodiesel and sustainable chemicals. Biodiesel is an increasingly important part of the energy sector, albeit not without controversy. If biodiesel becomes a sustainable preferred choice, the stock could benefit. The share price has been volatile this year, having more than halved from $113 in February.
Array Technologies, produces ground mount systems for solar panels. The share price has been under pressure this year, but in August Array received a $500 million capital injection from Blackstone. The recent profit outlook is favourable.
Enormous growth potential
By 2050, about half of the world's energy production is expected to come from renewable sources such as wind and solar power, according to the US Energy Information Administration. The above-mentioned companies will benefit from this. We will need a mix of renewable energies to replace fossil fuels to keep up with global energy demand. Not only is nuclear energy controversial, but biomass and wind energy are also receiving social criticism.
Difficult to choose the best investment
Social acceptance is only one of the factors surrounding renewable energy, and there are more challenges. This is why it is difficult to determine which companies will stand out from the rest in terms of impact and financial return. An energy mix fund with a spread of different energy sources, projects and/or companies can reduce the chance of making the wrong choice.
Renewable energy investment fund: FutureEnergyFund
An investment fund that spreads its investments over several forms of energy and companies is a sensible choice from a risk perspective. FutureEnergyFund is such an energy mix fund. The fund predominantly invests in existing wind and solar energy projects; the provider WindShareFund has years of experience in this field. In addition, investments in the development of green hydrogen offer further upward return potential.