While environmental, social, and governance (ESG) investing has been in the limelight as of late, a subcategory of the space, renewable energy, is also seeing strength. This is propelling funds to strong gains, like the Global X YieldCo & Renewable Energy Income ETF (YLCO), which is up 17% year-to-date.

YLCO seeks to provide exposure to an emerging class of income-generating renewable energy assets called YieldCos, along with other companies associated with the production of renewable energy that meet a minimum dividend yield criteria. Such companies may include renewable energy utilities (e.g., solar, wind and hydroelectric power), producers of renewable energy components, producers of biofuels, and other companies involved in the financing, installation, and operation of renewable energy projects, including smart grid technology.

YLCO gives investors exposure to:

  • High Income Potential: The Fund invests in YieldCos, which seek to return a large percentage of their cash flows as distributions, as well as dividend paying renewable energy companies.
  • Investment in Renewables: YLCO provides exposure to companies involved in a range of renewable energy projects, including production, components, systems, operations and technology.

The fund’s expense ratio comes in at 0.65%. Since its inception back in May 2015, the fund’s net asset value has grown almost 40%.

YLCO Chart

The Renewable Energy Space Is Flourishing

Per an Environment + Energy Leader article, despite the challenges brought forth by the pandemic, “businesses and governments continued to pursue their decarbonization plans in 2020, according to Deloitte. Even without a direct incentive for green infrastructure development in the economic stimulus measures passed in response to COVID-19, clean energy demand in the US proved resilient, as renewables and storage recorded declining costs and rising capacity and usage factors.”

The outlook for the renewable energy industry as a whole appears promising given the way it has been currently performing relative to the other energy sources. An incoming Joe Biden administration that views clean energy favorably will also help YLCO.

“Deloitte’s Renewable Energy Industry Outlook indicates that renewables edged out other electricity generation sources when electric demand fell this year (the US Energy Information Administration estimates that electricity consumption will likely fall by 3.9% year over year in 2020),” the article said. “Renewable growth is expected to rise in 2021 as the new administration starts to execute a platform that includes rejoining the Paris Climate Accord, investing $2 trillion in clean energy, and fully decarbonizing the power sector by 2035, according to the outlook.”

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