You may have heard about ETFs, but what do you know about thematic ETFs? iShares Global Clean Energy UCITS ETF (INRG) is a thematic ETF that follows the clean energy sector trends worldwide.
In this article, we deep dive into INRG, thematic ETFs, how they work and some of its holding companies. Read on to find out about that and more.
What Are Thematic ETFs?
A thematic exchange-traded fund (ETF) is the type of ETF that offers the opportunity to invest based on a specific theme or industry. Most thematic ETFs track companies that are expected to benefit from the hottest market trend or industry .
Some examples of the red-hot industries tracked by thematic ETFs are as follows:
- Blockchain and cryptocurrencies
- Clean energy
- Cloud computing
- Robotics and Artificial Intelligence
How Thematic ETFs Work
Investors who lack the resources of doing all the fundamental analytical work on individual companies may find thematic ETFs useful when they have their eyes on a particular trend or industry and wish to invest in it .
For example, provided you have gained an interest in clean and renewable energy and are confident with the potential in the future of the industry. You may consider investing in a thematic ETF that tracks a basket of companies in the industry at an expense fee. This gives you a slice of quick exposure to the trend and adds a handful of selected companies in the industry to your investment portfolio through the ETF.
Thematic ETFs use a specific weighted index of clean energy stocks, and the fund manager buys these stocks and gives them appropriate weighting in their portfolio. Buying a unit share of the ETF gives you exposure to all the companies in the ETF, which then gives you a narrow diversification across these green energy companies.
To own a share of the ETF, you pay the fund manager an expense ratio, a management fee calculated as a percentage of your investment in the fund. Thematic ETFs can be more expensive than Index ETFs, which typically charge a 0.1% fee.
Thematic ETFs can charge anywhere between 0.5% and 0.75% annually. What does that mean? If you invest $100,000 in a thematic ETF, your annual fee will range between $500 and $750, depending on the expense ratio.
What Is INRG?
INRG is the official ticker for the iShares Global Clean Energy UCITS ETF. The INRG ETF is designed to potentially generate a return on investment by using capital growth and generating income on the ETF funds. This ETF benchmarks the S&P Global Clean Energy Index .
The iShares Global Clean Energy UCITS ETF has three objectives :
- Invest in companies that produce clean energy, clean energy equipment and technology from both developed and developing markets
- Provide a mid to long-term outlook of the clean energy sector
- Exclude any companies with carbon emissions exceeding the index’s threshold.
How INRG Differs from ICLN
Since we already know what INRG is, let’s explore ICLN.
There’s no apparent difference between INRG and ICLN, except the markets in which these ETFs exist. The iShares Global Clean Energy ETF (ICLN) is the U.S. counterpart for INRG. ICLN is listed on the NASDAQ. On the other hand, INRG is listed across different markets from the UK to Europe. Some other slight differences include:
INRG is regulated under Financial Conduct Authority (FCA), while ICLN follows the regulations of the Securities and Exchange Commission (SEC) in the United States.
While INRG serves Europe and other parts of the world, ICLN serves the U.S. and Canadian markets.
The top 10 companies in INRG ETF
INRG and ICLN have the same holdings but manage them in different time zones. INRG focuses on the U.K., Europe, and global markets, whereas ICLN manages the ETF funds in North America. Here are the top five holdings under the INRG with their weightage.
|% In INRG Portfolio
|Enphase Energy Inc
|First Solar Inc
|Solaredge Technologies Inc
|Vestas Wind Systems
|Consolidated Edison Inc
|Plug Power Inc
|EDP Energias De Portugal Sa
|Adani Green Energy Ltd
The data for the table above is referenced from the BlackRock website .
The date below are the holdings in SPY as of 05 October 2022.Expense Ratio
Under its current setup, INRG’s expense ratio is 0.65%, while ICLN’s is 0.40%. The expense ratio data for both INRG and ICLN are as of 05 Oct 2022 [6,7].
Introduction to Some of The Holdings in INRG
As stated above, INRG invests in companies that produce clean energy and support clean energy with new equipment and technology. Here are some of the companies that are held in the INRG ETF. The companies held are not ranked in any order and not intended as, and shall not be understood or construed as, a recommendation, or basis to make any specific investment decision
Enphase Energy Inc
Enphase Energy Inc. (ENPH: NASDAQ) has its headquarters in Fremont, USA. It is a massive industry player, with over 2000 employees on its payroll. Enphase Energy was registered in 2006, focusing on supplying solar-based battery systems that use micro-inverter technology .
The company invests in projects that allow consumers to store, use, and sell excess energy they produce to other users. Enphase Inc. offers complete home energy solutions, allowing users to track their energy usage from home or office devices.
Vestas Wind Systems A/S
The Vestas Wind Systems A/S (VWS: CPH) is a Denmark-based wind company with investments in over 80 countries.
Incorporated in 1986, Vestas is another massive player in the wind energy sector, building wind turbines, wind power plants, and other wind components in their projects section. Vestas also offers installation services and sells spare parts .
Solaredge Technologies Inc
Solaredge Technologies Inc. (SEDG : NASDAQ) is an energy company headquartered in Herzliya, Israel. This company builds inverter solutions for photovoltaic (P.V.) systems. It was founded in 2006 to produce power optimisers, inverters, energy storage solutions, client monitoring programs and management systems .
Consumers can track, adjust, and get actual power usage and control their power equipment through the Solaredge module-level maximum power point. Also, they offer a proprietary integrated system that allows consumers access to all their information on direct current usage on a cloud platform.
Plug Power Inc
Plug Power Inc. (PLUG: NASDAQ) is another leading U.S.-based alternative energy company set up in 1999 to provide fuel cell turnkey solutions.
Under the stewardship of current CEO & director Andrew J. Marsh, Plug Power focuses on improving hydrogen energy technology. Plug Power deals with the Proton Exchange Membrane, fuel processing technologies, and hydrogen fuel cells .
Other services offered by Plug Power include the production of zero-emission fuel cells for logistics and supplies of on-road E.V.s. It mainly serves the North American and Europe markets.
First Solar Inc.
First Solar Inc. is a well-known solar technology company based in the United States, manufacturing Photovoltaic cells and other solar energy solutions .
This company uses semiconductor technology as an alternative to the traditional Silicone P.V. solar modules. Also, First Solar offers equipment maintenance and project activities.
Why Trade INRG?
- Investing in INRG is user-friendly. Rather than doing your own research on individual companies, the fund manager has already done it for you.
- INRG offers narrow diversification for companies in the clean energy sector, with relatively lower risk than investing in individual companies.
- INRG is relatively liquid. INRG are readily available to be bought and sold on exchanges.
Here are some downsides to INRG:
- In comparison to standard ETFs, it’s slightly more expensive to trade the INRG ETF. Most ETFs have expense ratios lower than ICLN’s 0.40%.
- Clean energy is a volatile industry, making INRG a higher-risk ETF than more diversified options like the S&P 500.
- The outcome of investing in INRG and other thematic ETFs depends heavily on ever-changing market trends which can be difficult to time.
- INRG and other thematic ETFs have lower adoption because their fundamentals rely on trends.
Where and How To Trade INRG
Does the clean energy space interest you? Here’s a short guide on where to find the INRG ETF and how to get started.
Find and Select a Broker.
To access the ETF markets, you must first find a broker and a trading platform. How do you choose an ideal broker with hundreds of brokers to choose from?
Look out for:
- A reputable broker regulated by the FCA, SEC, SEBI or ASIC
- Transparent terms and conditions, with clear trading fee and cost structure
- An easy-to-use platform with plenty of features
- Fast order execution speeds
- Responsive, multilingual customer support available 24/7
Open a Trading Account or a Demo Account
After you select a broker, create a trading account on their platform. You may also start with a demo account. Trading ETFs is not a get-rich-quick scheme. Only expose your capital to the markets once you have enough experience from practice.
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- “What are Thematic ETFs? – Trackinsight” https://www.trackinsight.com/en/education/what-are-thematic-etfs Accessed 07 Oct 2022
- “Invest Thematically – Blackrock” https://www.blackrock.com/au/intermediaries/ishares/thematic-investing Accessed 07 Oct 2022
- “iShares Global Clean Energy UCITS ETF – BlackRock” https://www.blackrock.com/uk/individual/products/251911/ishares-global-clean-energy-ucits-etf Accessed 07 Oct 2022
- “iShares Global Clean Energy UCITS ETF – iShares by BlackRock” https://www.ishares.com/uk/individual/en/products/251911/ishares-global-clean-energy-ucits-etf Accessed 07 Oct 2022
- “Holdings – BlackRock” https://www.blackrock.com/americas-offshore/en/products/251911/ishares-global-clean-energy-ucits-etf Accessed 07 Oct 2022
- “Key Facts – BlackRock” https://www.blackrock.com/americas-offshore/en/products/251911/ishares-global-clean-energy-ucits-etf Accessed 07 Oct 2022
- “Portfolio Characteristics – BlackRock” https://www.ishares.com/us/products/239738/ishares-global-clean-energy-etf Accessed 07 Oct 2022
- “About us – Enphase” https://enphase.com/about-us Accessed 07 Oct 2022
- “Vestas Mergers and Acquisitions Summary – Mergr” https://mergr.com/vestas-wind-systems-a%2521s-acquisitions#analytics-tab Accessed 07 Oct 2022
- “SolarEdge Home – SolarEdge” https://www.solaredge.com/us Accessed 07 Oct 2022
- “About Us – Plug Power” https://www.plugpower.com/about-us/ Accessed 07 Oct 2022
- “Leading the World’s Sustainable Energy Future – First Solar” https://www.firstsolar.com/ Accessed 07 Oct 2022