iShares Global Clean Energy ETF

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Clustered approach

Companies are either clean energy producers or clean energy technology & equipment providers

Well positioned

Due to it being a passive investment it will likely attract strong interest from investors

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ESG competitive

The fund receives an MSCI ESG Quality Score of 6.5, ranking relatively highly against peers

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Strong performance

Three year annualised returns of 18.5% likely reflects increased interest in the clean energy theme

The ETF

This fund is a passive index strategy, seeking to track the performance of the S&P Global Clean Energy Index. This provides investors with exposure to 30 of the largest global companies involved in the clean energy sector.

S&P Global Clean Energy identifies a universe of companies being in the clean energy business based on their membership in two of the following clusters: Clean Energy Producers and Clean Energy Technology & Equipment Providers.

Exposure scores for each company are defined depending on its primary business. An exposure score of 1 means its primary business is clean energy; 0.5 is multi-industry with significant clean energy exposure; and 0 is no exposure so is therefore eliminated. The 30 largest companies with exposure score of 1 are selected.

Clean energy

BlackRock have identified 5 megatrends as the long-term forces shaping our future, and offers 13 megatrend ETFs to help investors position for tomorrow. One of these is Climate Change and Resource Scarcity, which focuses on the fact that demand for a clean and green tomorrow will advance energy and conservation.

It’s estimated that 50% of the world’s energy is to come from solar and wind by 2050, which equates to 7 times the percentage in 2015. In order to implement government renewable energy targets by 2030, almost £2tn of investment is needed. By the time 2040 comes around it’s thought that renewables will represent 75% of the $12tn invested in new power technology. The presence of these factors offers considerable opportunities for clean energy related businesses.

The fund receives an MSCI ESG Quality Score of 7.4, ranking it in the top 5% against its peers. It also gets an MSCI ESG Rating of AA, ranking the fund as a leader in managing the most significant ESG risks and opportunities. The ESG ratings are a direct mapping of the ESG Quality Score to letter rating categories.

Example holdings

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Holding
What they do
Ormat Provides clean, reliable energy solutions from geothermal, recovered energy as well as energy management and storage solutions.
First Solo Has engineered, constructed and currently operates many of the world’s largest grid connected photo voltaic power plants.
Verbund An Austria’s leading electricity company and one of the largest producers of electricity from hydropower in Europe. Close to 100% of their electricity comes from this source, serving c.40% of Austria’s power demands.

The fund provides very good exposure to the clean energy theme and is aligned with 2 sustainable development goals: affordable and clean energy, and climate action. Overall the fund has around 63% greater exposure to sustainable solutions compared to its reference benchmark.