Investing in renewable energy and environmental companies

The UK Government has announced a commitment to achieve net-zero emissions by 2050 by making the UK a world leader in green energy and renewables. The new scheme called Build Back Greener aims to increase jobs and reduce carbon emissions. The Government will invest £160 million into the scheme to increase offshore wind capacity.

As the Government looks to use wind to generate electricity for every UK home by 2030, we look at the options for those wanting to invest in renewable energy or environmental businesses.

Investors could buy shares directly in renewable energy and environmental companies. Many of these firms are not listed on the stock market and this makes it difficult to find them to buy and more difficult to then sell. The minimum amount required for any investment may also be very high, placing them out of reach of the average investor.

Investment trusts are an alternative to buying shares directly. These allow investors to pool their funds together to buy shares in companies usually listed on a stock exchange. These pooled investments are called investment trusts and are usually managed by a fund manager. There are specific investment trusts that only invest in renewable energy or environmental companies. There are also ethical investment trusts, which will invest money with firms that work for positive social outcomes to support the environment. You can find out more in our guide about how ethical investment trusts work.

Aquila European Renewables Income Fund PLC (AERS )
This fund aims to generate returns with a diversified portfolio of renewable energy assets. It invests in diversified operating and a limited number of greenfield renewable energy assets. This includes hydropower plants, wind farms and solar farms across Europe and Ireland.

Greencoat UK Wind
This renewable fund has been listed on the London Stock Exchange since 2013. The aim of the fund is to deliver annual dividends in line with inflation (RPI). The majority of investments are in offshore and onshore UK wind farms.

US Solar Fund
This fund invests in solar power assets in North America and OECD countries in the Americas. The fund listed on the London Stock Exchange in 2019 with an Initial Public Offering that raised $200 million.

Gresham House Energy Storage Fund
This fund invests in energy storage systems that primarily use batteries in Great Britain. These companies help to capture excess energy generated from solar and wind power and prevent this from being wasted.

SDCL Energy Efficiency Income Trust PLC
This fund listed on the London Stock Exchange in 2018 and invests in energy-efficient projects with high-quality private and public sector counterparties in the UK, continental Europe and North America.

Ventus VCT PLC and Ventus 2 VCT PLC
These venture capital trust (VCT) invest in companies developing or operating renewable energy projects in the wind and hydroelectric sectors.

Gresham House Renewable Energy VCT 1 and VCT 2 PLC
These VCTs invest in a portfolio of clean technology and environmentally sustainable investments in the UK and EU.

The energy renewable sector is an exciting area and one that is likely to transform our daily lives as energy moves from coal and oil to alternative sources. However, investors should be aware that the renewables sector is still developing its commercial viability and technologies are still emerging. Renewable energy projects can also involve a high level of debt – again adding to their risk. Investors should consider investing in renewables only as part of a diversified portfolio.

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