The clean energy debate has been taking place for years and while the current state of clean energy technology and infrastructure is not yet at an economically sustainable level, allocating to clean energy is still an intriguing potential long-term investment.
It is important to understand that when advances in technology make clean and renewable energy economically feasible, we should see increased adaptation. The world's fossil fuel reserves are finite, and as we consume more of these resources, they become increasingly expensive and difficult to extract. Governments around the world are responding by setting target dates for reducing carbon emissions and increasing the use of clean energy sources, most notably the United States and EU (2050) and Saudi Arabia (2060).
This shift towards clean and renewable energy may represent an opportunity for investors. As the demand for this energy grows, so too will the demand for companies that provide the necessary solutions. This includes companies involved in energy production, energy storage, electric vehicles, and energy-efficient technologies. Investing in these companies now may offer the opportunity for long-term returns. However, like any other early investment, it can be difficult to select specific companies to invest in. There will always be winners and losers. To manage risk more effectively, invest in ETFs that have exposure to many companies involved in the clean energy space. Adding clean energy ETFs to a well-diversified portfolio may help position investors for the future. iSectors® has a clean energy position, the Invesco WilderHill Clean Energy ETF ($PBW), within our iSectors® Liquid Alternatives Allocation.
No matter how one feels about investing in clean/renewable energy investments it is likely they are here to stay. While the current state of clean energy technology and infrastructure may not be at an economically sustainable level, gaining exposure could be a good long-term investment. As the demand for clean energy grows, so too will the demand for companies that provide clean energy solutions, whatever “clean energy” means. What we know as “clean” or “renewable” energy today, will likely just be “energy” tomorrow.