Why invest in renewable energy stocks right now?
With increasing global support for sustainability and government incentives for clean energy, investors have a unique opportunity to enter a high-growth sector.
The renewable energy industry is expected to play a crucial role in the world’s transition from fossil fuels. Despite market fluctuations, long-term trends suggest strong potential for returns. Economic disruptions continue to expose vulnerabilities in traditional energy sectors, making renewables an attractive alternative.
Renewable energy stocks belong to clean energy production, distribution, and technology companies. These companies focus on sources like solar, wind, hydro, geothermal, and biofuels. Unlike fossil fuels, renewable energy sources replenish naturally, making them a sustainable long-term investment.
Investing in renewables isn’t just about sustainability but long-term value and economic growth. Here’s why:
- Renewable energy ROI: have the potential to yield significant economic benefits, with studies suggesting returns up to eight times higher by 2050. This promising outlook should excite investors about the long-term ROI of this sector.
- Disruption of fossil fuels: The oil and gas sector has been volatile, with some major companies losing up to 45% of their market value in recent downturns.
- Job creation: The energy sector has the potential to create over 40 million jobs globally by 2050. This significant job creation should inspire investors to support the growth of this industry, which is in stark contrast to the projected job losses in the fossil fuel sector.
Top Canadian renewable energy stocks
Here are some of Canada's best renewable energy stocks based on market capitalization, growth potential, and dividend stability.
Renewable energy stocks on the TSX
(Click ticker symbol to see each stock, more details below the chart)
How to invest in renewable energy stocks
If you’re a first-time investor, getting started in renewable energy is easier than you think. Here are two ways to invest:
Invest in renewable energy with an online brokerage
Opening a self-directed investing account allows you to buy stocks or ETFs focusing on renewable energy. Platforms like Questrade and Wealthsimple offer commission-free ETF purchases, making them cost-effective.
Key tips:
- Diversify: Don’t put more than 5-10% of your portfolio into renewable energy.
- Start small: Begin with 1-3 stocks that cover different energy sources (e.g., solar, wind, biofuels).
- Consider ETFs: Funds like the Invesco Solar ETF (TAN), iShares Global Clean Energy ETF (ICLN), and BMO Clean Energy Index ETF (ZCLN) provide broad exposure to clean energy stocks.
Simplify environmental investing with a robo advisor
If you prefer a hands-off approach, robo-advisors like Wealthsimple and Justwealth offer Socially Responsible Investing (SRI) portfolios that include renewable energy-focused ETFs. These portfolios are automatically managed and rebalanced, making investing effortless.
| Wealthsimple | Questwealth portfolios | Justwealth |
|---|---|---|
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◦ Low fees: 0.5% for most accounts; no minimum
◦ Ease of use: Intuitive platform with automated rebalancing ◦ SRI focus: Exclusive SRI portfolios, including Halal, screening out harmful industries ◦ Average MER for SRI portfolio: 0.23% |
◦ Low fees: Starting at 0.25%; actively managed, $1,000 minimum
◦ Custom risk profiles: Portfolios tailored to individual comfort levels ◦ SRI options: Actively managed ESG portfolios for responsible investing ◦ Average MER for SRI portfolio: 0.24%, depending on risk level |
◦Specialized portfolios: Over 70 portfolio options, $5,000 minimum
◦ Personalized advice: Dedicated portfolio manager for every account ◦ SRI focus: Offers socially responsible ETF portfolios ◦ Average MER for ESG portfolio: 0.23%, depending on specific portfolio |
| Wealthsimple review | Questwealth review | JustWealth review |
| Visit Wealthsimple | Visit Questwealth | Vist Justwealth |
The future of renewable energy investing
Clean energy stocks have faced volatility due to inflation and rising interest rates, but many analysts see a buyer’s market emerging. The long-term outlook remains strong as governments push for more aggressive climate policies and clean energy technology improves. Investors focusing on ESG (Environmental, Social, and Governance) factors may find renewable energy stocks an ideal addition to their portfolios.
Final thoughts
The transition to clean energy is well underway, making renewable energy stocks a compelling investment opportunity. Whether you prefer stable dividend payers like Brookfield Renewable and Algonquin Power or high-growth players like Northland Power, there are multiple ways to gain exposure to this transformative sector.
Want a broader approach? Consider ESG funds that focus on socially responsible investing. These funds provide exposure to clean energy while ensuring your money supports sustainable initiatives.
FAQ
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter @moneymozartblog.
Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Money.ca.
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