But is INRG actually the best UK clean energy ETF to invest in? I’m not so sure. If I was looking to invest in renewable energy stocks through an ETF today, I think there could be better options for my portfolio.

The best UK renewable energy ETF?

One that looks superior to me is Lyxor New Energy UCITS ETF (LSE: NRJL). This is a smaller, more under-the-radar product with net assets of around €1.4bn.

This ETF is different to iShares Global Clean Energy in that it tracks the World Alternative Energy index. This is an index composed of the world’s 40 largest companies operating in the renewable energy, distributed energy, or energy efficiency sectors, that derive at least 40% of their revenues from alternative energy activities.

By contrast, the iShares Global Clean Energy tracks the S&P Global Clean Energy index, which is an index of around 100 clean energy-related companies in developed and emerging markets.

Better long-term performance

While the fact that these two track different indexes may not seem like a big deal, it has actually made a massive difference to performance, both in the short term and in the long term.

For example, if we look at performance this year, INRG has delivered a share price return of -13%. Meanwhile, NRJL has delivered a return of 5% (to 31 October).

Meanwhile, if we look at the 10-year returns to 31 October, INRG returned around 215% while the Lyxor fund (I’m looking at the EUR version here because it has a longer track record) returned around 295%. That’s a significant difference. 

Now these performance figures don’t tell the full story. That’s because INRG had a period of strong outperformance last year. This is illustrated by the fact that for the three years to 31 October, INRG returned around 220% while the Lyxor ETF returned around 140%.

However, I like the consistency of NRJL’s returns. I’d rather not invest in an ETF that is prone to huge price swings.

Lyxor New Energy risks

Of course, the Lyxor New Energy UCITS ETF isn’t perfect. Because it tracks an index that only has 40 renewable energy stocks, as opposed to around 100 for INRG, stock-specific risk is higher. If a handful of companies in the World Alternative Energy index blow up, this ETF could underperform. It’s worth noting that the top holding at 31 October, Schneider Electric had a 15% weighting in the index. That adds risk.

Another issue to be aware of is that the GBP version of this ETF isn’t available on all platforms. It is available on AJ Bell Youinvest while Hargreaves Lansdown only appears to have the EUR version.

Overall though, I see it as a good ETF for clean energy stocks. If I was looking to invest in renewable energy stocks via an ETF (I’m not, because I prefer to invest in individual stocks), I’d certainly consider NRJL.

One of the easiest ways to invest in clean energy stocks is through an exchange-traded fund (ETF). These essentially allow investors to gain exposure to a wide range of stocks with just one trade. With that in mind, here are three UK renewable energy ETFs I’d consider for 2021 and beyond.

iShares Global Clean Energy UCITS ETF

The most popular renewable energy exchange-traded fund in the UK is the iShares Global Clean Energy UCITS ETF (LSE: INRG). It currently has net assets of around $6bn.

INRG tracks the S&P Global Clean Energy index. This index, which aims to hold around 100 companies, is designed to measure the performance of companies in global clean energy-related businesses from both developed and emerging markets. Stocks in the index at present include the likes of Vestas Wind Systems, Solaredge Technologies, Plug Power, and SSE.

The performance of this ETF has been mixed. This year, it has underperformed, delivering a return of -23% to the end of September. However, for the three years to the end of September, it returned 159%, which is an excellent performance. Over the 10 years to the end of September, it returned 186%.

Ongoing fees are 0.65% per year.

Lyxor New Energy UCITS ETF

The Lyxor New Energy UCITS ETF (LSE: NRJL) is a smaller, more under-the-radar offering with net assets of around €1.3bn at present.

NRJL tracks the World Alternative Energy index. This is composed of the world’s 40 largest companies operating in the renewable energy, distributed energy, or energy efficiency sectors, that derive at least 40% of their revenues from alternative energy activities. Stocks in the ETF at present include Schneider Electric, Orsted, Vestas Wind Systems, and STMicroelectronics.

Performance here has been pretty consistent. The latest data (as of 22 October) shows a year-to-date return of 6%, a one-year return of 23%, a three-year return of 128%, and a 10-year return of 270%. Overall, performance has been quite solid.

Ongoing fees here are 0.6%.

L&G Clean Energy UCITS ETF

A third ETF I’d consider is the L&G Clean Energy UCITS ETF (LSE: RENG). This is a relatively new fund that was launched late last year. It currently has net assets of around $125m.

RENG aims to track the performance of the Solactive Clean Energy index. This seeks to provide exposure to a wide range of companies across the clean energy value chain. Some names in the index at present include Aker Solutions, Tesla, Subsea 8, and Saipem.

Because this ETF is relatively new, it doesn’t have a long-term performance track record. However, my calculations show that year to date, it has returned about -2%.

Ongoing charges are 0.49%.

A final word on renewable energy ETFs

It’s worth pointing out that while renewable energy ETFs minimise stock-specific risk because they are diversified, they’re still higher-risk investments. That’s because they are highly focused on the one industry.

Personally, I don’t own any of these ETFs right now as I prefer to invest in individual stocks. This approach allows me to focus my capital on my best ideas.