Industry Voice: The growth potential of climate change — is it worth the investment?

Geopolitics has pushed the issue of energy security up the agenda over the past year, compounding an ever-growing consensus for the need to transition away from fossil fuels and towards renewables. Watch the video podcast to learn more.

Sarka Halas
clock • 2 min read
Industry Voice: The growth potential of climate change — is it worth the investment?

Clean energy is a rapidly growing, transformative mega-trend offering investors the potential opportunity to capture real returns while tackling some of our most pressing climate goals. 

The sector is driven by supportive government policies as part of efforts to transition towards net zero, and simple economics as the price of renewables tumbles due to technological advances. Renewable energy is now cheaper than coal in two-thirds of global markets, according to a report by International Renewable Energy Agency

 "As awareness of this theme rises, I think investors will become increasingly knowledgeable about clean energy and how it is produced," says Steve Gray, Head of Wealth Management at LGIM.

"One consequence of this might be that we'll potentially see rising demand for ETFs that capture the whole renewable energy value chain rather than just manufacturers of solar panels, for instance," he says.

Opportunity across the value chain

As well as original equipment manufacturers (OEMs), the value chain includes utilities that own clean power generating facilities and suppliers that provide a diverse set of components and services to OEMs.

Grey believes that gaining exposure to the whole value chain while remaining focused on the clean energy theme will highlight the importance of specialist industry knowledge.

"That's why our clean energy ETF aims to draws on data on more than 120,000 power-related tenders and contracts worldwide to respond to new entrants and clean energy trends," he says.

The asset manager's view

While the investment case for this theme stands up on purely financial grounds, many investors will also want to see their capital being used to drive positive change in the world they live in.

Asset managers such as LGIM with a long history of actively participating at shareholder meetings on behalf of index investors could stand out to asset owners who do not believe an indexed approach to investment should be a barrier to having a voice on the issues that matter.

For investment professionals only. Capital at risk. 

Important Information: For professional clients only. Past performance is not a guide to the future. The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. Views expressed are of LGIM as at June 1, 2023. The Information in this document (a) is for information purposes only and we are not soliciting any action based on it, and (b) is not a recommendation to buy or sell securities or pursue a particular investment strategy; and (c) is not investment, legal, regulatory or tax advice. Legal & General Investment Management Limited. Registered in England and Wales No. 02091894. Registered Office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No. 119272.

More on ETFs

Partner Insight: Vanguard European ETF flows summary - August inflows fall

Partner Insight: Vanguard European ETF flows summary - August inflows fall

Read Vanguard's latest monthly summary of flows in the European ETF market.

Vanguard
clock 02 October 2023 • 10 min read
Partner Insight: Vanguard - in times of volatility, low-cost index investing still shines

Partner Insight: Vanguard - in times of volatility, low-cost index investing still shines

Our latest research shows that, for most investors, their best chance of maximising returns over the long term lies in minimising costs by investing in low-cost index funds and ETFs that track their market benchmarks

Stephen Lawrence - Head of Indexing Research, Vanguard Investment Strategy Group
clock 01 August 2023 • 6 min read
Partner Insight: Is it time to invest in the hydrogen economy?

Partner Insight: Is it time to invest in the hydrogen economy?

Hydrogen is everywhere on our path to decarbonisation.

Sarka Halas
clock 24 May 2023 • 1 min read

In-depth

Rise and fall of finfluencers: Shifting the advice landscape

Rise and fall of finfluencers: Shifting the advice landscape

Investors shift back to traditional advice as finfluencers’ popularity falls

Sahar Nazir
clock 24 May 2024 • 7 min read
Back to low inflation: How can we expect the rest of 2024 to play out?

Back to low inflation: How can we expect the rest of 2024 to play out?

‘By August, the conditions will be met to start cutting’

Charlotte Moore
clock 23 May 2024 • 4 min read
Advisers should not be social media stars… but should learn from them

Advisers should not be social media stars… but should learn from them

‘Engaging with new formats is not a vanity project for advisers anymore’

Justin Cash
clock 21 May 2024 • 4 min read