With the Australian Government acknowledging the significant challenge of achieving net zero emissions by 2035, and Vanguard, one of the world's largest fund managers, pulling out of the Net Zero Asset Managers initiative, it may be time to reassess investments in this sector, writes Wealth Within chief analyst Dale Gillham.
The situation is complicated, especially since Vanguard's main competitor, BlackRock, the largest fund manager, remains committed to its sustainable energy fund. This disparity underscores the ongoing debate about the feasibility and effectiveness of reaching net zero.
For those optimistic about achieving net zero, Australia's renewable energy sector offers numerous investment opportunities.
ETFs, such as the VanEck Global Clean Energy ETF or the BetaShares Climate Change Innovation ETF, can provide market exposure. However, it's important to note that both ETFs are currently trading near their all-time lows, having dropped around 40% each from their listing price, with no clear signs of a price rebound yet.
Investing in clean energy production
Alternatively, investing directly in ASX-listed companies involved in clean energy production might be a better approach.
This strategy provides direct exposure to the alternative energy sector and allows you to own shares in specific companies.
One notable example is Origin Energy Ltd. Origin has made significant strides in renewable energy projects, including large-scale battery energy storage systems and strategic partnerships to advance renewable energy technologies.
Turning to the share price, Origin has experienced a bullish run since May 2021, with the share price up over 160%. In comparison, the clean energy ETFs I refer to above are still falling, a stark contrast that supports the idea of direct stock investment over ETF exposure.
That said, given Origin's strong performance since 2021, there is potential for the stock to temporarily pause in its upward momentum, especially as it is currently trading around a previous resistance level.
Nonetheless, I encourage you to keep a close watch on the share price, as the stock is quite volatile and could present a buying opportunity very soon.
Dale Gillham is the chief analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth — It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au