Table of Contents
Table of Contents

Investing in the Global Renewable Energy Sector

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Consumers have begun to embrace these many forms of renewable energy amid growing concerns over carbon dioxide emissions. You may also have started to rethink this market as reliance on government subsidies ebbs.

The global renewable energy industry was valued at $881.7 billion in 2020. It's forecast to reach $1,977.6 billion by 2030, demonstrating a compound annual growth rate of 8.4% from 2021 through 2030. Let's take a look at how you can capitalize on these trends and invest in the global renewable energy industry.

Key Takeaways

  • The global renewable energy industry is expected to reach $1,977.6 billion by 2030.
  • The easiest way to invest in alternative energies is through exchange-traded funds (ETFs) that provide diversified exposure within a given sector.
  • You should think carefully about the components of these ETFs before investing in them.
  • Clean energy bonds may also be an option to reduce the risk of default. They can generate predictable returns over time.

Regulation Moves Forward

The need for alternative energies is becoming apparent. Carbon dioxide levels have been rising since the Industrial Revolution. The last nation on Earth without a 400 parts per million (ppm) reading finally reached it in 2013. The event marked the first time that carbon dioxide reached these kinds of levels in four million years, suggesting that these problems stem from human emissions rather than natural phenomena.

Governments have embraced these concerns by passing mandates to limit the volume of harmful emissions. Representatives from 196 countries adopted the Paris Agreement to address greenhouse gas emissions, adaptation, and finance at the 21st Conference of the Parties of the UNFCCC in Paris in December 2015. This could set the stage for a growing number of regulations around the world.

Governments have played a role in destabilizing parts of the alternative energy industry at the same time. China disrupted the solar industry in 2013 by selling massive amounts of photovoltaic solar modules. This pressured other manufacturers around the world following its chronic oversupply. The industry also relies on a number of subsidies from various countries, such as Germany’s heavy subsidies for solar power.

Investing With Equity ETFs

The easiest way to invest in alternative energies is through exchange-traded funds (ETFs). These funds provide diversified exposure within a given sector. You may want to think about exposure to a certain type of alternative energy in some cases, such as wind or solar, or you may simply want exposure to a broad range of alternative energies.

Many ETFs can cater to these various needs. The most popular alternative energy ETFs include:

  • Guggenheim Solar ETF (TAN)
  • Invesco WilderHill Clean Energy Portfolio ETF (PBW)
  • VanEck Global Alternative Energy ETF (GEX)
  • iShares Global Clean Energy ETF (ICLN)
  • Invesco Cleantech Portfolio ETF (PZD)

Think carefully about the components of these ETFs before investing in them. Some alternative energy portfolios might be weighted in solar. Others may be concentrated in a single country like China. These elements can expose you to certain risk factors that you may not expect in what appears to be a broad-based alternative energy fund.

Investing in Bonds

You have many options beyond equities when it comes to investing in alternative energy projects. This includes a growing array of clean energy bonds. Some of these bonds are issued by companies looking to complete alternative energy projects through municipalities or other sources. Others are issued by alternative energy consulting firms that are looking to raise capital cost-effectively to finance projects.

SolarCity is among the most popular of solar-backed bonds. You can purchase these bonds through the company’s website or its brokerage firm. Each bond is backed by tangible solar energy installations. They're similar to traditional bonds in that they make regular interest payments and mature at a certain date, but purchasing them helps improve the affordability of solar installations throughout the U.S.

You can purchase bonds in a number of alternative energy companies on a global level as an option to purchasing equity. Bonds may be preferable in many cases. For example, they provide a lower default risk. They have preferential rights to a company’s assets.

The Bottom Line

The global renewable energy sector is expected to see ongoing growth as governments push to meet updated mandates. The industry has experienced some ups and downs in the past, but you can purchase clean energy ETFs as a way to diversify your exposure and reduce risk. Clean energy bonds may also be a nice option to reduce the risk of default and generate predictable returns over time.

Article Sources

  1. Allied Market Research. "Renewable Energy Market Outlook 2025."

  2. NASA Global Climate Change. "Responding to Climate Change."

  3. United Nations Framework Convention on Climate Change. "The Paris Agreement."

  4. Information Technology & Innovation Foundation. "The Impact of China's Production Surge on Innovation in the Global Solar Photovoltaics Industry."