Invest in UN SDG 7: Clean Energy with ESG ETFs

The United Nations Sustainable Development Goals (SDGs) are 17 goals that all UN Member nations have agreed to achieve by 2030. They set out an ambitious mission to eradicate issues that affect our society and environment. Affordable and Clean Energy has a central place in UN's agenda through its SDG #7 entitled “Ensure access to affordable, reliable, sustainable and modern energy for all”, and underpinned by 5 ambitious targets. In this article we highlight how you can contribute to UN SDG Goal 7: Clean Water and Sanitation with ESG Exchange-Traded Funds (ETFs).

17 SDGs for a better future

The Sustainable Development Goals (SDGs) are 17 goals with 169 targets set by the United Nations in 2015 as a global initiative to tackle issues that affect humans and the environment we live in, with the hope of achieving tremendous progress by 2030.

The 17 sustainable development goals (SDGs) to transform our world:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation and Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to achieve the Goal

Each goal has several targets and is measured quantitatively by indicators provided by private and public entities. The creativity, knowhow, technology, and financial resources from all stakeholders are necessary to achieve the SDGs in every context. The beauty of these goals is their interrelation, meaning that action in one area will affect outcomes in others. The development of those goals must balance social, economic and environmental sustainability.

What is UN SDG GOAL #7: Affordable and Clean Energy?

Humans everywhere are entitled to every aspect of a decent life, from healthy food, clean water, good education to affordable healthcare. One aspect that is often overlooked is what powers them all, Energy.

The world is still falling short in providing affordable, reliable,sustainable and modern energy for all. Despite the progress over the past decade on improving access to electricity, increasing renewable energy use in the electricity sector and improving energy efficiency.

According to the United Nations, as many as 660 million people worldwide may still be without access to electricity in 2030. As for those who would have access, they will still largely rely on polluting fuels and technologies and will be exposed to high levels of household air pollution with serious consequences for their cardiovascular and respiratory systems.

SDG Goal 7 has 5 targets set for completion by 2030:

1. Provide access to affordable, stable, and modern energy services for all.
2. Increase share of renewable energy in the global energy mix.
3. Double the rate of energy efficiency improvement.
4. Encourage international cooperation to facilitate access to clean energy research and technology and promote investments in related fields.
5. Improve energy infrastructure, technologies, and services in developing and least developed countries through support programs.

According to the International Energy Agency (IEA), a yearly investment of $1.3 to 1.4 trillion across renewable energy, energy efficiency and universal access, is required until 2030 to meet SDG #7. While progress is being made to scale-up financing, current annual financing levels are significantly below this level, at approximately US$514 billion (IRENA & CPI, 2018). Moreover, investment is not spread equally, with developed countries and some middle-income countries accessing finance while many developing countries are left out.

To track progress, the United Nations along with all related stakeholders have established statistical indicators attached to each target. It helps parties adapt and improve actions toward making the goal attainable by 2030.

Investors can support Affordable & Clean Energy with ESG ETFs

Today, impact investing has become the norm, with billions of dollars flooding the market in adequately screened investments, focusing on entities that align their operations with SDG and ESG initiatives (Environmental, Social, Governance). Corporate Social Responsibility departments (CSR) went from being a cost burden to an existential necessity that represent employees and consumers values.

The change in investors' mindsets has given birth to mutual funds and ETFs that provide exposure to securities that work towards achieving ESG or SDG goals. It allows them to invest in opportunities that can provide wealth accumulation while making an impact.

List of ESG ETFs promoting Affordable and Clean Energy

Trackinsight analyzes the fact sheets and other publicly available information of all ETFs in the ESG universe. The information is screened for statements that show an explicit tilt towards specific Sustainable Development Goals.

In relation to the "Affordable and Clean Energy" goal, Trackinsight identifies 51 ETFs totaling $26.2 billion.

Top 10 Largest ETFs supporting SDG 7

1. iShares Global Clean Energy ETF: $6,800 million
2. iShares Global Clean Energy UCITS ETF (INRG): $6,436 million
3. Invesco Solar ETF (TAM): $4,043 million
4. First Trust NASDAQ Clean Edge Green Energy Index Fund: $3,363 million
5. Invesco WilderHill Clean Energy ETF (PWYF): $2,096 million
6. Lyxor New Energy (DR) UCITS ETF (LYNRJ): $1,634 million
7. ALPS Clean Energy ETF (ACES): $1,086 million
8. L&G Hydrogen Economy UCITS ETF (HTWO): $590 million
9. Global X China Clean Energy ETF: $585 million
10. Invesco Cleantech ETF: $459 million

These ETFs invest in companies that support the 7th SDG Goal, including businesses whose primary operations are focused on clean energy production and related services.

The iShares Global Clean Energy ETF or ICLN, is the biggest ETF in that space with more than $6.8 billion in assets. The fund invests in companies that produce energy from solar, wind, and other renewable sources.

In terms of country exposure, ICLN is invested in the United States (44.24%), Denmark (11.72%), China (6.62%) and Canada (6.45%) among other. In terms of sector exposure, 21.45% of the investments are allocated to Electric Utilities, followed by Semiconductor Equipment (20.65%), Electric Components & Equipment (14.55%) and Renewable Electricity (13.91%). The fund's top holdings include:

1. Enphase Energy (10.1%): American company that designs and manufactures software-driven home energy solutions that span solar generation, home energy storage and web-based monitoring and control.
2. Vestas Wind Systems (6.64%): Danish manufacturer, seller, installer, and servicer of wind turbines.
3. Plug Power Inc. (6.39%): American company engaged in the development of hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity.
4. SolarEdge Technologies (5.62%): Israel-headquartered provider of power optimizer, solar inverter and monitoring systems for photovoltaic arrays.
5. Consolidated Edison (5.31%): American company engaged in the regulated electric, gas, and steam delivery businesses in the United States.
6. Orsted (5.08%): Denmark-based energy company engaged in procuring, producing, distributing and trading energy and related products in Northwestern Europe.
7. Iberdrola (3.87%): Spanish holding company, which engages in the generation, distribution, trading, and marketing of electricity.
8. EDP Energias De Portugal (3.55%): Portuguese utilities company that generates, supplies and distributes electricity and the supply of gas in Portugal and Spain.
9. Sunrun (3.34%): American provider of residential solar panels and home batteries.
10. SSE PLC (3.3%): U.K. company engaged in the generation, transmission, distribution and supply of electricity, in the production, storage, distribution and supply of gas and in other energy services.

The fund trades mainly on the NASDAQ and charges an annual fee of 0.42%. Since inception on June 24th, 2008, ICLN has returned a cumulative loss of -43.69% and an average annual loss of -3.1% (Up until October 31st, 2021). However, on a 10-year basis, the fund generated a cumulative gain of +227% and an average annual gain of +12.6%. 

For European investors, iShares Global Clean Energy UCITS ETF or INRG offers similar exposure. It trades on multiple exchanges including London Stock Exchange (United Kingdom), Deutsche Boerse Xetra (Germany), Borsa Italiana (Italy), SIX Swiss Exchange (Switzerland) and Bolsa Institucional de Valores (Mexico).

Keep reading:

• 5 things you should consider when buying ESG ETFs
• Invest in SDG 6, Clean Water & Sanitation with ESG ETFs
• Invest in UN SDG Goal 5: Gender Equality with ESG ETFs

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