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How To Invest In Renewable Energy

How To Invest In Renewable Energy

The global power sector is ditching fossil fuels for renewables, and that means one thing: now is a great time to invest in renewable energy stocks. Whether you’re a seasoned investor or the recent GameStop drama was your first intro to the stock market, investing is for everyone, and this guide is here to help you out!

According to the International Energy Agency, renewable energy will become the largest generator of electricity worldwide by 2025. As a result, socially responsible investing has been on the uptrend in recent years. Investing in renewable energy entails allocating funds to companies that are related to things like energy efficiency, pollution control, and other environmentally-friendly initiatives. Essentially, it promotes a more sustainable energy sector.

There are multiple factors playing into the rise of renewable energy stocks in the U.S., including technological advances and shifting business models, but a big factor is the new presidential administration. 


The Green Lights for Green Energy

Before taking office, President Joe Biden announced his extensive economic and environmental plan — which includes the prioritization of renewables and clean energy. Under his administration, the U.S. will strive to become net-zero emissions, economy-wide, by no later than 2050, as well as to create a pollution-free power sector in the next 15 years. As a result of this announcement (and his subsequent election), renewable stocks rallied on election weekend, and they’re only projected to continue soaring.

But the rise of renewable energy stocks hinges on more than the person sitting in the Oval Office. Other factors, such as new advances in technological innovation, a skyrocketing demand for solar power, and a spark in the electric vehicle sector can also be attributed to the rise of renewable energy stocks. 

Take Tesla, for example. The EV brand currently manufactures 500,000 cars per year, but plans to produce 20 million vehicles by 2030. However, the company isn’t stopping at just cars: Tesla is gaining traction in the energy business, which includes ventures in solar power and energy storage. This could mean Tesla becomes a trillion dollar business in the near future — and stocks are reacting accordingly. 


Investing in Renewables

If you’re brand new to investing in general, check out this handy beginner’s guide for learning how to start. 

There are a few options to invest in sustainable energy companies. One of these is a mutual trade fund, like Fidelity’s Select Environment and Alternative Energy Portfolio. A mutual fund allows investors to buy and sell multiple stocks at a time — sometimes it’s referred to a “basket” of stocks. Fidelity’s mutual fund includes companies in market sectors like renewable energy, energy efficiency, and environmental support services. (Tesla is one of them).

Other options for investing in renewables are energy-traded funds (ETFs), and the word on the street is out: green energy ETFs are hotter than ever before. ETFs are similar to mutual funds in that they’re a basket of similar stocks, but there are a few key differences, one being that ETFs are index funds. ETFs are a good way to go if you’re looking for lower investment minimums; mutual fund minimums are typically on the pricier side. 


You can find some of the top renewable ETFs for 2021 here


Ultimately, buying a renewable energy mutual fund or ETF helps diversify your investments, meaning it lowers your risk for losing out if stocks plummet. Every investment inherently comes with risk, but it’s often correlated with returns. 

The future is bright for renewable energy, and investing in renewables opens up a possibility for us to participate in it! 


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