Two of the stronger funds in terms of investment returns in the U.S. this year – both run by the asset manager Invesco -, focus on clean energy. According to a Financial Times report, investors are increasingly seeking out holdings with robust environmental, social, and governance (ESG) credentials.
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Invesco: Solar and Wilderhill Clean Energy ETFs
The two more robust funds of the Atlanta-based asset manager, Invesco, have more than tripled their value thanks to a surge in solar energy stocks’ value this year. According to a Financial Times report, these kinds of investments have increasingly received attention as inflows are speeding up into ESG investment strategies.
One of those funds is the Invesco Solar exchange, which has $3.7bn in assets. As of December 24th, it had risen 238 percent since the start of the year. In this regard, Invesco Solar now tops a league table of U.S. ETFs and mutual funds that invest in equities, followed by Invesco WilderHill Clean Energy ETF, which has returned 220 percent.
One of the latter’s most extensive holdings is FuelCell Energy, which designs and makes power plants. This company’s shares have gained almost 400 percent this year.
Among other ETF’s top funds are ARK Genomic Revolution ETF, First Trust Green Energy Index ETF, and Ark Innovation ETF.
The increasing relevance of ESG
Rene Reyna, head of thematic and specialty product strategy at Invesco, told F.T. “a Joe Biden win combined with the rapid decline in renewable energy costs has contributed to further appreciation for solar and clean energy funds.”
According to the Institute of International Finance, ESG assets and the funds that hold them have surged more than 50 percent since the end of 2019. IIF has also said this trend had accelerated in recent weeks as investors anticipate active support from the incoming Biden administration.
Furthermore, out of all the equity funds in the U.S., the ESG fund places to number five on the league table of inflows. For instance, BlackRock’s iShares ESG Aware MSCI USA ETF had attracted a net inflow of $9.3bn in the year. According to Morningstar, the fund is designed to track the S&P 500 broadly.
BlackRock has said its fund represents an easy entry point to ESG investing. The company has been arguing that accelerating inflows into such funds will drive up popular ESG stocks.
“Companies with the highest ESG ratings collectively outperformed” during the pandemic market crash in March and beyond, said Romain Boscher, global chief investment officer for equities at Fidelity International. “We believe ESG adoption will only accelerate in 2021, especially as climate change moves up the agenda in the U.S.”