Increasingly, investors are considering how to invest in renewable energy. This is part of a wider move toward socially responsible investing. Additionally, there are a number of apps changing the way we invest. These apps offer access to different types of investing, including buying into the energy sector.
Along with seeing increased democratization of the stock market, these apps are helping us invest in alternative energy sources (beyond just buying into Tesla). Let’s take a look at how you can invest in renewable energy in a way that works for you.
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Why you might invest in renewable energy
When learning how to invest money, there are a lot of things to consider, including the types of assets you want to focus on. If you’re concerned about the environment, there are a number of reasons to invest in the renewable energy industry.
One of the biggest reasons is a focus on climate change. The general scientific consensus is that climate change is happening and that humans are contributing to it.
Not only that, but there are concerns that climate change could be a serious national security threat. With all of that in mind, it can make sense to shift a portion of your portfolio into renewable power if you’re interested in encouraging continued emphasis on reducing the impact of climate change and increasing sustainability.
However, it’s not just about putting your dollars where your values are. There might also be business potential in the renewable energy sector. With the U.S. re-entering the Paris Agreement, and more companies looking for ways to move forward, there are different opportunities to profit.
Businesses pursuing alternative forms of energy — including geothermal, solar and wind — could potentially see gains in coming years as green energy becomes more popular and efficient.
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4 ways to invest in renewable energy (other than Tesla)
If you’re looking for how to invest in renewable energy, there are a few choices — and you don’t even have to buy shares of Tesla (though you could). Here are some ideas for investing in renewable energy, depending on your preferences.
Image Credit: Tesla Model S by Guillaume Vachey (CC BY).
1. Components manufacturers and installers
Solar panels and wind turbines need to be produced and, when finished, installed. These are companies that produce the actual parts that make renewable energy usable.
From manufacturing wind turbine blades to creating batteries for electric cars to constructing geothermal pumps to all the elements that go into solar photovoltaic energy production, these manufacturers could potentially benefit from increased demand for renewable energy production.
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Some of the companies that you could potentially invest in include:
- First Solar, Inc. (FSLR): Makes solar systems and modules.
- Enphase Energy (ENPH): Provides solar energy cells, along with necessary equipment for monitoring.
- JinkoSolar Holding Co. Ltd. (JKS): Based in China, this company manufactures all sorts of solar products, from solar modules to silicon wafers.
- Vestas Wind Systems A/S (VWDRY): This company based in Denmark manufactures wind turbines and installs them.
- American Superconductor Corp. (AMSC): Focuses on control systems, generators, and power converters aimed at renewable energy.
- TPI Composites Inc. (TPIC): One of the top manufacturers of wind turbine blades.
- Sunrun (RUN): Large installer of residential solar panels.
- Albermarle Corp. (ALB): This company makes lithium batteries, which are used in electric vehicles.
Depending on your situation, it might be a smart move to add these kinds of energy investments to your portfolio. You could also research other renewable energy stocks to find additional ideas for investing.
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2. Utility companies
Utility companies have long been considered good choices for investing because people need power. However, there are also companies that have a high rate of renewable energy production. These companies are working to expand how they generate power by adding renewable energy projects.
On top of that, there are companies called yieldcos that specifically focus on renewable energy portfolios. These companies operate similarly to the master limited partnerships (MLPs) so often seen in fossil fuel production. Basically, the idea is to return cash flow from various renewable energy assets — whether it’s power production or manufacturing — to shareholders.
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Some of the companies that you can consider as you invest in utilities or yields include:
- NextEra Energy Partners LP (NEP): One of the world’s largest utility companies, it’s also a yieldco that focuses on wind and solar power.
- Brookfield Renewable Partners L.P. (BEP): Operates utility facilities that focus on renewable energy sources.
- Enviva Partners LP (EVA): This company focuses on renewable energy from biomass.
- Hannon Armstrong Sustainable Infrastructure (HASI): This yieldco focuses on investing in renewable energy products and assets that focus on building out renewable energy infrastructure.
- Duke Energy Corp. (DUK): Electric utility with a large number of renewable energy products in the pipeline.
- Xcel Energy Inc. (XEL): Invests in power generation projects related to renewable energy.
- Southern California Edison (SCE): This large investor-owned utility is set to ramp up renewable projects and is well-known for its ability to deliver solar power to its power customers.
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3. EV manufacturers
When many people think of electric vehicle (EV) manufacturing, Tesla (TSLA) is one of the first companies that come to mind. However, Tesla isn’t the only EV manufacturer, and you could potentially invest in other companies that focus on these cars.
Image Credit: Chevrolet Bolt EV by Gregory Varnum (CC BY-SA).
Some other potential stocks for your portfolio include:
- ElectraMeccanica Vehicles (SOLO): This EV company focuses on very small cars with a small impact and is based in Canada.
- Nio (NIO): Based in China, Nio is an EV company that has access to one of the biggest markets in the world.
- Arcimoto (FUV): This is another mini-EV maker that makes small cars that look more like fun cars, even though they are highway-legal.
- Workhorse Group Inc. (WKHS): Rather than focusing only on cars, Workhouse Group also manufactures delivery drones that are EVs.
- Plug Power Inc. (PLUG): This isn’t a company that makes EVs. Instead, the company focuses on making hydrogen fuel cells designed to power commercial EVs.
- Ford Motor Co. (F): If you’re looking for an old standby, Ford might be just the thing. Ford is doubling its investment in EV, so it’s joining the ranks of companies that are looking for new alternatives.
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4. Values-based ETFs or Indexes
Values-based investing revolves around the idea that you could put your money into companies and assets that reflect your personal morals and values. Over the past several years, there have been different ETFs (exchange-traded funds) and index funds that focus on socially-responsible investing or that collect assets designed to appeal to people with certain values.
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If you’re looking for different ways to invest without having to pick individual stocks, values-based ETFs and index funds can provide you a way to do that. Some of the clean-energy ETFs that vet for environmental impact include:
- Invesco WilderHill Clean Energy (PBW): This ETF offers you the chance to access global renewable energy sources.
- iShares Global Clean Energy (ICLN): Another ETF that focuses on a global renewable energy portfolio.
- Invesco Solar (TAN): As you might expect, this ETF includes a variety of solar energy assets that allow you to take advantage of various stocks that are different stages of the solar energy pipeline.
- VanEck Vectors Low Carbon Energy (SMOG): Although not completely focused on renewables, this ETF is based on the performance of assets with lower carbon footprints.
- SmartETFs Sustainable Energy II (SULR): Another ETF that focuses on global energy efforts, taking a look at sustainable energy.
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How to easily invest in renewable energy
Investing in renewable energy is fairly straightforward. You can open a brokerage account and begin buying shares of companies and ETFs that focus on renewable energy. Some of the best investment apps make it easy to buy and sell renewable energy stocks.
One of the easiest ways to get started is to choose a broker that offers fractional shares. Fractional shares are portions of shares, so you don’t have to buy a whole share at once.
When you use a company like Stash to invest in fractional shares, you can begin building a portfolio, even if you don’t have enough cash to buy a full share. In fact, with Stash, you could begin investing in a company like Brookfield Renewable, with just a few dollars.
Plus, Stash comes with a debit card, Round Ups, and automatic investing to make it really easy to invest in renewable energy stocks and ETFs.
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If your style is more in line with robo-advisors, you can use something like Betterment to easily invest in renewable energy. For example, Betterment offers a range of socially-responsible investing portfolios, including one that focuses on climate impact.
The climate impact portfolio focuses on ETFs that have low carbon footprints, invest in renewable energy projects, and even those that have companies divesting from fossil fuels.
No matter your investing style, it’s relatively easy to get started finding companies and ETFs designed to encourage renewable energy development — and you might even financially benefit from it.
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1. Is renewable energy a good investment?
Whether renewable energy is a good investment depends on the goals and values of your portfolio strategy. Renewable energy could be a good choice if you believe that the economy, business and policy will favor renewables in the future, and investing now could help you grow your portfolio. Carefully consider your own goals and the needs of your portfolio before moving forward.
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2. What are the best renewable energy companies to invest in?
The best renewable stocks are those that fit your situation and portfolio goals. There’s no one right answer for everyone. Consider your goals and what you want for your portfolio. Review the companies and their valuations. Check to see whether their fundamentals are strong and if their values match up with yours if that’s important to you. Ultimately, the best choice in renewable energy stocks and ETFs will depend on your own situation and what works for your portfolio.
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3. Why is Tesla stock so high?
Part of the reason Tesla stock is so high is that it is a leader in EV technology, and the company has been able to prove there is market demand for electric vehicles. Additionally, Tesla has a well-known leader who excites people and encourages them to invest.
There are many reasons any stock could move higher, including market conditions, company fundamentals, leadership, revenues and product. Pay attention to the news about any company, including Tesla, to make a decision about whether it could be a smart addition for your portfolio.
Image Credit: Tesla Model 3 by Guillaume Vachey (CC BY).
Renewable energy provides interesting opportunities for investment and diversification, depending on your situation and what you’d like to see in your portfolio.
With a focus on reducing the impacts of climate change and emissions, and a current administration that has expressed a commitment to renewable energy development, there might be opportunities to invest in stocks and funds that focus on renewable energy.
With options ranging from the solar industry to the auto industry, you have a lot of investment options in front of you. As you figure out how to invest in renewable energy, make sure you review your goals and portfolio strategy.
Do your due diligence to make sure you’re choosing investments that fit your needs and situation. There’s always a risk of loss when you invest, especially in times of market volatility, so it’s important to carefully vet any investment you make.
* Disclosure: The author of this piece has positions in TSLA, PBW, and BEP.
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