Investing in renewable energy stocks

By Louise Chan

July 31 2018
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Investors are now more conscious about the types of activities and companies their monies fund, especially because of the growing concern over the effects of climate change.

sprout plant lightbulb soil investing in renewable energy stocks

Fortunately, the number of companies focused on mitigating the effects of climate change through the renewable energy industry is also growing. Investors who wish to support the renewable energy industry or simply want to make more informed and ethical investment decisions may wish to invest in renewable energy stocks.

The Australian Securities Exchange (ASX) have made many of the listed companies accessible to the investing public.

Why renewable energy?

There are two very good reasons to consider investing in companies whose business focuses on renewable energy: climate change and finite resources.

Running out of natural resources—whether coal, oil or other hydrocarbon-based energy sources—is a question of when not if.

Most of the resources that supply the world’s energy requirements will run out at some point in the future, regardless if it is decades or centuries from now. Continuous development of renewable energy is one way to extend the life of these finite resources.

Those who cannot actively participate in the development process can still make valuable contributions through responsible investing focusing on renewable energy stocks. This way, investors are able to contribute to efforts in saving the environment and mitigating the effects of climate change.

If these are not enough, there’s still another compelling reason: investors also receive financial rewards either through dividends or from the increase in their investment’s value.

Where to find renewable energy investments

Investors have the choice of supporting companies that fully commit their business to alternative energy or those that only have partial involvement in it. Their choice will determine the number of investment options they will have.

As of 2017, renewable energy companies make up less than 10 per cent of the more than 2,000 listed companies in the ASX. Furthermore, only a handful of these businesses focus solely on renewable energy and sustainability because other companies are only partially involved in the industry.

Grenum has a list of ASX-listed green companies organised according to their area of business and colour coded according to whether renewable energy is the company’s focus or only one part of the business.

How to invest in renewable energy stocks

The share market is a good place to find and purchase renewable energy stocks. These stocks are accessible as individual shares or managed funds.

Individual stocks

It is best for investors to research the company they wish to invest in if they want to own individual stocks. As mentioned earlier, some companies only have partial involvement in renewable energy initiatives. However, some fund managers may already consider and recommend them as viable renewable energy stocks because of the limited selection available in the ASX.

To find out if the company is a purely renewable energy stock, read up on the company’s business or check the company’s name against the ASX-listed green companies.

Index funds or exchange-traded funds (ETFs)

Investors may opt to purchase index funds or ETFs to gain more exposure to the clean technology sector or specific sectors in the renewable energy industry, both locally and in the global market.

For Australian companies, investors may want to consider the Australian CleanTech Index.

Talk to a financial advisor or broker and ask for a list of responsible, ethical or impact investments focused on renewable energy investments.

This information has been sourced from ASX and Australian Cleantech.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise Chan

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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