How to invest in renewable energy equities

Written by Rebecca Jones on 18th Dec 2018

This is the third article in a new series from Good With Money: “The Good With Money Guide to Renewable Energy Investment – How To Invest In Renewable Energy For Beginners,” produced in collaboration with Mint Selection, a renewable energy finance and project development recruitment consultancy. 

One of the many ways investors can get involved in renewable energy is through listed renewable energy companies, or equities. These are publicly traded on stock markets, making them easy to access through a stockbroker or online trading platform. Moreover, as regulated instruments, renewable equities are also eligible for inclusion in stocks and shares and lifetime ISAs, helping savers to keep their gains tax-free.

 

Renewable companies in the UK

Perhaps unsurprisingly, there are not a huge number of renewable energy companies currently listed on stock markets. In the UK, one of the biggest is PV Crystalox Solar (LON: PVCS), a £40 million firm listed in London in 2007 that manufactures and supplies components for solar panels. Good Energy Group (LON: GOOD) is also involved in solar, though on the supply side, helping households and businesses to access local renewable energy.

Away from solar, both Ceres Power (LON: CWR) and AFC Energy (LON: AFC) are involved in the cutting edge area of hydrogen fuel cells, which harness the power of hydrogen and oxygen to create energy. Hydropower is represented by Simec Atlantis Energy (LON: SAE), which has the largest portfolio of tidal power projects in the UK, while in the biomass industry (involving burning plant waste to create gas and electricty) London is home to Active Energy (LON: AEM) and Aggregated Micro Power (LON: AMP).

Investing in individual equities is considered risky business, usually best left to seasoned investors. This is especially true when it comes to smaller companies, all of which the above are. Most are listed on the London ‘AIM’ market, similar to the ‘penny stocks’ sector of the US market, famous for its volatility. Similarly, returns on these stocks also vary widely. Over the past three years, for example, only shares in PV Crystalox Solar, Aggregated Micro Power and Ceres have delivered a positive return, ranging from 37 per cent to 186 per cent (see below).

 

Share price performance of UK listed renewable companies

UK renewable equities

Total % return 1yr

Total % return 3yr

Total % return 5yr

Active Energy Group -57.3 -78.8 -48.8
AFC Energy -57.5 -83.1 -85.7
Aggregated Micro Power Holdings 20.0 37.3 n/a
Ceres Power Holdings 52.0 151.5 98.8
Good Energy Group -42.7 -51.7 -58.0
PV Crystalox Solar 14.3 186.4 56.3
Simec Atlantis Energy -43.1 -35.9 n/a

All data is sourced from FE Analytics and is to Friday 7 December 2018 before stockbroking fees and charges.

 

For more information on how to assess an equity, see the second installment of our series: ‘How to pick a renewable energy investment’, quick tools for analysis.

 

Listed renewable energy investment trusts

Listed renewable energy equities can serve as a good diversifier for an existing portfolio, giving investors exposure to an asset that is uncorrelated to main markets. New investors to the area, however, may do better to consider an investment trust. Just like an equity, an investment trust is listed on the stock exchange and investors buy shares in it. Unlike an individual equity, though, an investment trust is highly diversified, with each typically investing in more than 50 companies.

Popular renewable energy investment trusts include Greencoat UK Wind (LON: UKW) and Foresight Solar (LON: FTSV), both of which invest exclusively in wind and solar assets, respectively, and have returned more than 39 per cent and 31 per cent over the past three years. The John Laing Environmental Fund (LON: JLEN) and The Renewables Infrastructure Group (LON: TRIG) are two trusts that invest more broadly, with each holding investments across the sustainable infrastructure spectrum.

 

Share price performance of UK listed renewable investment trusts

Investment Trust

Total % return 1yr

Total % return 3yr

Total % return 5yr

The Renewables Infrastructure Group 13.3 37.4 51.5
Foresight Solar 12.5 31.9 46.2
Greencoat UK Wind 12.4 39.6 64.2
John Laing Environmental Assets Group 8.4 24.1 n/a

All data is sourced from FE Analytics and is to Friday 7 December 2018 before fees and charges.

 

ISAs and platforms

Whether you choose to invest in individual equities or an investment trust, however, you should be sure to do so in the most tax efficient way possible. Typically, this will be through either a stocks and shares ISA or a lifetime ISA, the latter if you plan to invest as part of saving to buy a home or for your retirement. Both allow investors to keep their investment gains tax free up to a limit of £20,000, which can be split anyway between the current range of ISAs that also includes the cash ISA and the innovative finance ISA (IFISA). You can find more information on investing through these ISAs by selecting the links above.

You can open a stocks and shares or lifetime ISA through your bank, stockbroker or through an online fund platform. In any case, but particularly the latter, you should be sure to choose one with a charging structure that best suits the size of your portfolio. Generally, those with portfolios of £50,000 or less should choose percentage-based fees with platforms like AJ Bell, Tilney Best Invest or Charles Stanley Direct. Fixed fees, however, typically better serve those with higher value portfolios, and popular providers include Alliance Trust Investments and Interactive Investor.

 

My first renewable equity

Charlie Giblin, London

“I want to invest for long-term security as well as to deepen my understanding of financial markets and the options available to me. It’s important to me that I’m putting money into areas that I believe in. I think renewable energy is the future so I believe investing in this space is long-term, as well as socially responsible.

I don’t know much about investment, so it might be a steep learning curve!

I decided to invest £2,500 into the John Laing Environmental Assets Group (JLEN) investment trust. Having run through the numbers, including its return on equity (RoE) and share price to net asset value (NAV), I feel it has strong fundamentals. Additionally, I like that it is invested across the industry, from onshore wind to solar to biomass. Most funds I reviewed were 100 per cent wind or solar or if mixed, not beyond more than two technologies.

I chose to invest through a stocks and shares ISA through online investment platform Hargreaves Lansdown as, comparing it to others, the fees seemed reasonable and I was impressed when I spoke with them on the phone. I think that I will regularly pick new stocks and aim to complete the full ISA allowance each year. Doing this made me realise I don’t know much about investment though, so it might be a steep learning curve!”

This series had been sponsored by Mint Selection, a specialist renewable energy finance and project development recruitment consultancy.

 

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