Investors expected more out of renewable energy stocks and exchange traded funds this year, and while frustration with slack performances is warranted, it shouldn’t get in the way of long-term perspective.
Taking the long view is likely the best way of approaching clean energy investments, such as the Invesco WilderHill Clean Energy ETF (PBW). In fact, the International Energy Agency’s (IEA) 2021 Renewables Market Report confirms PBW’s diverse approach to this space could be durable over the long haul.
“The growth of the world’s capacity to generate electricity from solar panels, wind turbines and other renewable technologies is on course to accelerate over the coming years, with 2021 expected to set a fresh all-time record for new installations,” according to IEA.
The $1.84 billion PBW, which turns 17 years old in March, follows the WilderHill Clean Energy Index. That gauge provides PBW with a broad foundation to capitalize on multiple growth drivers of long-term renewable energy adoption.
“The amount of renewable capacity added over the period of 2021 to 2026 is expected to be 50% higher than from 2015 to 2020. This is driven by stronger support from government policies and more ambitious clean energy goals announced before and during the COP26 Climate Change Conference,” notes the IEA report.
PBW features exposure to six sectors, highlighting the fund’s ability to deliver a wide array of renewable exposure under one roof. That’s relevant because an array of industries are expected to facilitate renewables growth in the years ahead.
“By 2026, global renewable electricity capacity is forecast to rise more than 60% from 2020 levels to over 4 800 GW – equivalent to the current total global power capacity of fossil fuels and nuclear combined. Renewables are set to account for almost 95% of the increase in global power capacity through 2026, with solar PV alone providing more than half,” adds the IEA.
When it comes to growth, PBW offers plenty. Barely more than 7% of its 73 components are large-cap stocks, indicating that the fund could be home to some up-and-comers among renewable energy stocks. Additionally, about 55% of its holdings are classified as growth stocks.
Over the past three years, PBW is up 245.5%, compared to a gain of “just” 162% for the widely followed S&P Global Clean Energy Index.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.