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Energy ETF UK – Renewable, Clean, and Green Energy ETF


If you are curious about investing in an environmentally friendly way, an energy EFT UK account could be for you. You only have to read on to learn more about clean, green energy ETFs UK accounts, including those in emerging markets.

🤔️ Are ETFs risky?Low Risk. Some are riskier than others
💰 Who can buy or invest in an energy ETF?Any investor (institutions and individuals)
➕ What are the advantages of an energy ETF?• Diversification
• Transparency
• Liquidity
💥 Examples of Energy ETFs?Vanguard Energy ETF, iShares Global Energy ETF, and Invesco Solar ETF

What is an ETF?

If you delve into the question of what is an ETF, you’ll discover it to be a kind of investment fund that comprises various assets, futures and shares that are traded on the stock market. A clean energy ETF UK fund is one whose multiple assets are in what are classed as green, renewable energy sectors, as is the Invesco solar ETF UK fund, for example.

An ETF is a type of fund that tracks a group of assets, much like an index fund does. The ETF vs Index Fund debate is ongoing. But from a risk point of view, one of the most important differences between the two products is that while an index fund tracks a group of assets, they are all in one sector. In contrast, the assets in an ETF can be spread across various sectors giving you even greater diversification and, therefore, potentially, less risk.

Are energy ETFs a good investment?

An energy ETF is an Exchange Traded Fund that offers investors an opportunity to gain exposure to the energy sector. This includes investing in companies engaged in the oil, gas, and alternative energy industries.

The energy markets are notoriously volatile, but an energy ETF enables investors to mitigate that volatility by providing them access to a wide range of investments rather than opting for individual companies or sectors. So, with constant demand but plenty of diversification, many investors believe energy ETFs to be good investments – especially the trend in the green ETFs UK investors can access.

The companies included in energy ETFs

When we talk about the companies included in an energy ETF, these are companies from various sectors within the energy ETF umbrella. These sectors can include production, refining, transportation and storage. It can also include businesses involved in marketing and the exploration of sources for gas and oil, as well as companies that provide equipment and services for these industries.

It doesn’t, however, include companies specifically involved in renewable energy. Instead, you’ll find these shares in these companies being offered in UK renewable energy ETF funds. The fknol.com lists 28 clean energy ETF UK funds currently quoted on the LSE.

Various investment vehicles and risks

If you want to start an investment portfolio, one of the first things you will need to consider is your attitude toward risk. Of course, all investors are not risk averse, but naturally, they want to keep it to a minimum while fostering growth.

Traditionally, one of the more stable markets here in the UK is that of property, which is why some investors choose real estate investments in the UK. However, there are many ways of going about it. For example, some investors choose to become property developers with a view to going down the buy-to-let route. For other investors who want to embrace ESG principles, their investment decision is to go into affordable social housing, while many opt for property investment trusts or REITs.

Another lower-risk investment vehicle is the Bond ETF. As the name implies, this type of ETF contains a number of bonds rather than shares. One of the disadvantages of Bond ETFs is that the bonds they contain never mature, making it slightly more challenging to mitigate the risk of interest rate changes. But, on the plus side, like some other types of ETFs, Bond ETFs pay regular dividends.

One of the main reasons investors decide to invest in ETF funds of one category or another is because they offer good diversification, which is one of the critical ways of mitigating risk. Another is deciding to invest long-term.

While ETFs generally appreciate in value over time, many can also provide investors with an income through dividend payments.

Energy, including clean energy ETF UK funds and dividends

As just mentioned, many energy ETFs provide investors with dividend payouts. The frequency of payouts varies anywhere from monthly to quarterly or annually. A sample of dividend-paying energy ETF funds is shown below.

ETFDividend AverageETF Database Category AverageFactSet Segment Average
ALPS clean energy ETF$0.76$0.33$0.33
iShares global clean energy ETF$0.12$0.14$0.07
iShares global energy ETF$0.43$0.34$0.43
Invesco Solar ETF$0.09$0.14$0.07
Invesco Wilderhill clean energy ETF$0.27$0.23$0.07
Vanguard Energy ETF$0.92$0.34$0.22
VanEck low carbon energy ETF$0.09$0.34$0.13
You can check out the dividend performance of all of the above and more on the etfdb.

How to invest in the energy sector using ETFs

Investing in energy ETF UK funds is relatively straightforward, but you need to formulate your investment objective strategy before you do anything else. How you plan to use the returns from your investments will influence the type of funds you should pick.

For example, stocks and shares ETFs are likely to provide you with a better return than Bond ETFs, but there is an increased element of risk. International ETFs rather than United Kingdom ETFs will give you greater diversity. Sector ETFs like UK clean energy ETF funds, or an ordinary energy fund like the Vanguard Energy ETF UK fund, which was created on the 23rd of September 2004 in the United States, allow you to target specific industries or sectors.

Even though the Vanguard fund doesn’t go under the name of the Vanguard clean energy ETF UK fund, or is regarded widely as an alternative energy ETF UK fund, most of the companies it represents are involved in green energy to a degree, including the likes of Exxon Mobil, Chevron Corp, and ConocoPhillips.

Other things you need to consider before you invest include paying attention to which benchmark index or indices an ETF tracks.

You must also decide whether you want an actively or passively managed ETF. The majority of ETFs are passively managed, but some are managed actively. The passive ones tend to outperform the active ones over the long term, while the actively managed ETFs might perform better in the short term. However, active asset management means significantly higher management fees.

Finally, check out the expense ratios of the ETFs that look of interest. They can vary significantly from fund to fund; if you are not careful, they can eat into your returns.

The next step, having decided on your strategy, is to decide on a broker or financial services company that will give you access to your chosen fund.

Whether you are looking for a renewable energy ETF UK fund or any UK ETF, it is strongly advised that the company you choose to work through is authorised and regulated by the Financial Conduct Authority.

The best energy ETFs

If you are looking for the best clean energy ETF UK fund, it may be worth considering the iShares offering.

The iShares global clean energy ETF UK Fund

The iShares global clean energy ETF UK fund is the largest and one of the market’s most popular clean energy funds. It has nearly $6 billion worth of assets under its management. Its expense ratio comes in at 0.46%, which is a little higher on average. It has an “A” rating on its MSCI ESG score. This is the highest rating with regard to environmental, social and corporate governance factors.

The fund’s objective is to make a return on your investment via a combination of capital growth plus earning an income on the assets the fund encompasses. According to the iShares ETF by Blackrock, these assets include shares in:

  • Enphase Energy – a solar panel plus storage company.
  • Orsted – a Danish energy company that operates in on and offshore wind energy and has committed to being carbon neutral by 2025.
  • Vestas Wind Systems – a company specialising in designing and installing wind turbines.

The iShares global clean energy UK share price underwent a benchmark enhancement on the 18th of October 2021. You can learn more about these enhancements on the London Stock Exchange website.

In addition, the S&P Dow Jones Index also took into account making changes to the Carbon Intensity Screen to reduce the index’s carbon footprint.

VanEck Vectors Semiconductor ETF

One of the best renewable energy ETF UK-accessible funds is the VanEck Vectors Semiconductor ETF. This fund comprises a range of businesses operating in the semiconductor production and energy-producing equipment industries.

When it comes to energy efficiency, semiconductors are essential. Semiconductors facilitate transforming things like solar and wind power into renewable, usable energy. They are also involved in another vital sector – energy storage.

Why green energy ETF funds UK or global are important

Helping to protect the environment is something that we should all be striving to do, and this includes your investment activities too. So you can play a part if you are considering a UK green energy ETF, a fund that observes ESG principles, or an EV ETF UK fund.

If you invest in energy ETF UK funds quoted on the LSE, you will likely trade in GBP. But suppose you are accessing funds quoted exclusively on financial markets or foreign exchanges like the NASDAQ. In that case, you will be trading in US dollars, so you will need to consider the exchange rate.

If you open a general investment account, you can invest as much money as you like, open different portfolios for various goals, including ESG investing, and access your money when needed.

However, investing can be tricky, especially for the uninitiated. Therefore, you may find it wise to track down an independent financial services management company with whom to discuss your investment aspirations.

Build your portfolio with Moneyfarm Share Investing

Moneyfarm has introduced its straightforward Share Investing platform, a gateway to the stock market accessible via web and mobile. This platform allows for direct share trading. It features a wide range of UK stocks, ETFs, and mutual funds, offering engagement in various market sectors and investment styles. So, if you want to buy and trade Renewable, Clean, and Green Energy ETFs in the UK, then Moneyfarm’s Share Investing is the way to go.

Additionally, the platform enables investment in a globally diversified, expertly managed portfolio, providing diverse options to suit your investment strategy and financial goals. Our service is tailored for long-term investment, ensuring you gain from our technology and expert advice from our investment consultants. This approach aligns your portfolio with your values and financial goals, giving you a comprehensive view of your investments for sound decision-making.

Moneyfarm’s Share Investing platform is designed to assist your investment journey, whether you invest in well-known companies, explore different sectors, delve into the world of ETFs, or expand your reach with our UK Mutual Funds, offering a personalized and informed investment experience.

FAQ

What is an energy ETF?

An energy ETF is an exchange-traded fund that helps investors diversify their portfolios and exposes them to the energy industry. Energy ETFs invest in oil, natural gas, and alternative energy companies.

Are energy ETFs safer than energy stocks?

Energy ETFs are not as risky as energy stocks because they provide exposure to equity markets without requiring investors to pick individual stocks. In the case of investing in stocks, if one particular energy company goes under, so will the value of your stock. If you have shares in an energy ETF with exposure to the same energy company, other investments within the ETF will hedge against the loss of a single stock.

Do energy ETFs pay dividends?

Many energy ETFs pay dividends, while others don’t. Please do your research if you are looking for ETFs that pay dividends.

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*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.