Environmental, social and governance (ESG) is becoming an integral part of the investment space and as more investors clamor for funds that hone in on these initiatives, ETF providers are scrambling to give the people what they want. One of these areas is alternative energy, which will allow ETFs that center on wind and solar power to come into focus.
“Coal and natural gas have been fighting for the top spot in the U.S. generation market for the last 20 years,” wrote Charles Fishman in Morningstar. “In 2016, gas generation topped coal for the first time. Gas is the new king, with 35% market share. Now the battlefield is shifting, and in the next decade we expect natural gas and renewable energy, particularly solar and wind, to slug it out.”
“Renewable energy has been growing at extraordinary rates but still has just 10% market share,” Fishman added. “By 2030, we forecast renewable energy to produce 22% of U.S. electricity generation, surpassing coal, nuclear, and hydro as the second-largest source of power generation in the U.S. We think gas will also be a winner because of its flexibility to support intermittent wind and solar, extending its market share lead to 41% over the next decade.”
Investors who want to take advantage of solar energy-focused funds can start with the Invesco Solar ETF (NYSEArca: TAN). TAN, which started back in 2008, seeks to track the investment results of the MAC Global Solar Energy Index, which is designed to provide exposure to companies listed on exchanges in developed markets that derive a significant amount of their revenues from the following business segments of the solar industry: solar power equipment producers including ancillary or enabling products.
Investors who want to capitalize on increasing reliance on wind as an alternative energy resource, they can look at the First Trust Global Wind Energy ETF (NYSEArca: FAN). The fund seeks investment results that correspond generally to the price and yield of an equity index called the ISE Clean Edge Global Wind EnergyTM Index.
FAN’s index provides a benchmark for investors interested in tracking public companies throughout the world that are active in the wind energy industry. In order to be eligible for inclusion in the index, a security must be issued by a company that is actively engaged in some aspect of the wind energy industry.
For more market trends, visit ETF Trends.