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Should I invest in the iShares Global Clean Energy UCITS ETF (INRG)?

Windmills for electric power production.
Windmills for electric power production.

The iShares Global Clean Energy UCITS ETF (LSE: INRG) is a popular investment in the UK. At Hargreaves Lansdown, for example, INRG is currently among the top 10 most held ETFs.

Clean energy is an investment theme that appears to have a lot of potential. Should I buy this iShares ETF for my investment portfolio though? Let’s take a look.

The iShares Global Clean Energy UCITS ETF explained

Let’s start with a look at what the iShares Global Clean Energy UCITS ETF is all about.

On the iShares website, it states that this ETF invests in companies (across both developed and emerging markets) involved in clean energy production, or the provision of clean energy equipment and technology. The aim of the ETF is to track the S&P Global Clean Energy index, which consists of about 100 renewable energy-related stocks.

Ongoing fees are 0.65% per year.

What stocks does INRG hold?

As for the stocks the ETF holds, it’s an interesting list of names. Here’s a look at the top 10 holdings as of 7 November:

Stock 

Weighting

Enphase Energy

8.0%

Iberdrola

6.2%

Consolidated Edison

6.1%

Vestas Wind Systems

5.6%

First Solar

5.3%

Solaredge Technologies

4.2%

Orsted

3.6%

Centrais Electr Bras-Eletrobras

3.0%

Adani Green Energy

3.0%

Plug Power

2.8%

There are some good companies on that list.

Enphase Energy, for example, impresses me. It’s a solar power and battery storage specialist. In recent years, it has registered strong top- and bottom-line growth.

However, there are also some companies on that list I’m not so excited about. Hydrogen fuel cell company Plug Power is one. This is a stock that is being heavily shorted by hedge funds (meaning that they expect it to fall).

In terms of the geographic split, the ETF currently has the most exposure to the US, at 38% of the portfolio. China is the second largest weighting, at 13%.

Has INRG been a good investment?

What about performance? Has the iShares Global Clean Energy UCITS ETF been a good investment in the past?

Well, to help answer that question, I’ve provided one-, three-, five-, and 10-year performance (annualised) in a table below (all figures to 31 October). I’ve also included the performance of iShares ETFs tracking the MSCI World index, the FTSE 100, and the S&P 500 over the same time horizons.

ETF

1-year return

3-year return

5-year return

10-year return

iShares Global Clean Energy UCITS ETF

-24.5%

21.7%

16.6%

13.2%

iShares Core MSCI World UCITS ETF

-18.6%

5.8%

6.1%

8.8%

iShares Core FTSE 100 UCITS ETF

1.6%

2.7%

2.7%

5.9%

iShares Core S&P 500 UCITS EF

-14.9%

9.9%

10.1%

12.4%

As you can see, over the last year, the clean energy ETF’s performance has been poor. It has underperformed all the other ETFs.

However, over a longer-term horizon, performance has been pretty good. Over three, five, and 10 years, it has beaten the other ETFs.

The takeaway here is that INRG tends to have hot and cold periods. A few years ago, it had a really hot run where performance was excellent. Right now, however, performance has gone a little cold.

Should I invest?

So should I buy this ETF? Well, there are definitely things I like about it. I like the fact that it provides one-click access to a broad range of clean energy stocks. And I like the performance over three, five, and 10 years.

However, all things considered, I think I’d prefer to buy a selection of individual clean energy stocks myself. This approach would give me more control over my holdings, and could allow me to generate even higher investment returns, if I pick the right stocks.

The post Should I invest in the iShares Global Clean Energy UCITS ETF (INRG)? appeared first on The Motley Fool UK.

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Edward Sheldon has positions in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2022