There are lots of reasons to be excited about advances in renewable energy: The field is helping to preserve the environment and creating new industries, and may make electric cars more affordable. If you want to get your investment portfolio involved in the green revolution, you can start by investing in renewable energy stocks.
Why should I invest in renewable energy?
Many people have personal or ethical reasons to invest in renewables, but the chance to help the planet isn’t the only potential benefit of including renewable energy in your portfolio. Investing in alternative energy can help diversify your holdings. When oil and other traditional energy resources are experiencing volatility, renewable investments may act as a stabilizing force.
Renewable energy itself is also becoming more affordable, making it more enticing to buyers and potentially to investors. The price of solar energy has dropped, as has the cost of solar panels themselves. Wind energy is also one of the fastest-growing energy sources in the world, and one of the cheapest.
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5 renewable energy stocks
This list includes stocks involved in the production of renewable energy, ranked by year-to-date performance. Keep in mind that stocks that are currently performing well may not be the best-performing stocks next year — or even next week. Investing in individual stocks is inherently risky and should be done with caution.
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Total year-to-date return
China Recycling Energy Corp.
Ormat Technologies Inc.
NextEra Energy Partners LP
Fusion Fuel Green PLC Class A
Atlantica Sustainable Infrastructure PLC
Methodology: All stocks are included in Morningstar's Utilities-Renewables industry designation, which includes utilities that predominantly produce some form of renewable energy. Stocks are listed by YTD performance. Data is current as of 2/1/21.
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An easier approach: ESG funds
If you’re excited about investing in wind and solar energy, there’s an easier way to do it than researching individual companies: mutual funds. These funds are like baskets of stocks — you invest in one fund and gain exposure to many companies all at once. ESG funds are graded in terms of their performance when it comes to environmental, social and governance factors. A fund that scores well in the “environmental” category likely avoids investing in companies with a large carbon footprint and may invest in multiple clean energy stocks.
According to independent research firm Morningstar, the number of sustainable index mutual funds and exchange-traded funds has more than doubled over the last few years — as has the money invested in them — giving sustainable investors more choice as to where they invest.
» Find alternative energy funds: Explore top-rated ESG funds
Frequently asked questions
Disclosure: The author held no positions in the aforementioned securities at the time of publication.