Thematic Investment: Building a Renewable Energy Portfolio

Introduction

Recently I’ve been learning more about different ways people invest, and one idea that stood out to me is thematic investing. Instead of just focusing on traditional sectors like technology or healthcare, thematic investing is about following big trends that are shaping the world. Some of the popular ones are artificial intelligence, ageing populations, and climate change.

For this project, I chose to focus on renewable energy. Everywhere I look, there are discussions about moving away from fossil fuels and towards cleaner energy. Governments are making policies, companies are changing their strategies, and even individuals are becoming more aware of sustainability. I wanted to explore why renewable energy is such a big deal, what’s driving it, and how someone could build a simple portfolio around this theme.

Understanding Thematic Investment

Thematic investing basically means putting money into ideas or megatrends instead of just sectors. From what I’ve read, thematic funds have become really popular in the last few years. For example, Morningstar reported that assets in these funds more than doubled from about US$269 billion to US$562 billion over five years, up to June 2024 (Portfolio Adviser+1). That shows investors want more than short-term returns and they want their money to reflect values they care about.

I think that’s one reason thematic investing is so interesting. It lets people support areas they believe in, like sustainability or healthcare, while still trying to make a profit. Out of all the possible themes, renewable energy feels really important because it connects to climate change and also has strong potential for growth.

The Importance of Renewable Energy

One of the biggest reasons people care so much about renewables is climate change. A report by Ember (2024) says renewables made up a record 30 percent of global electricity in 2023, with solar and wind doing a lot of the heavy lifting (Reuters).

There is also the economic side to consider. The International Renewable Energy Agency (IRENA) projects that the energy transition could create 40 million new jobs globally by 2050, with 18 million of those in renewables alone (SustMeme). This shows that renewables are not just about reducing emissions. They are also about building industries, creating opportunities, and making investment choices that could have both financial and social impact.

Identifying Key Renewable Energy Sectors

Renewable energy might be one overall theme, but there are actually a lot of different parts within it.

Solar is probably the one that gets the most attention, and it’s easy to see why. Reports show that the solar market is growing really quickly. SolarPower Europe (2024) explained that global solar capacity is expected to keep rising, and BloombergNEF added that nearly 600 GW of solar power was installed in 2024, which was about 35 percent more than the year before (SolarPower Europe, BloombergNEF). This shows how demand is increasing as costs for panels continue to fall.

Wind is also a big area, especially offshore wind. The International Energy Agency said that offshore wind capacity could grow fifteen times larger by 2040 if countries keep supporting it with policies and new technology makes it cheaper (IEA). In places like the UK, offshore wind farms are already becoming a really important part of energy supply.

Hydropower is different because it has been around for ages and while it’s not growing as fast as solar or wind, it still plays a really important role in many countries and gives a steady source of renewable electricity. In 2023, the global hydropower fleet reached about 1,412 GW installed capacity and for that year, conventional hydropower capacity grew by around 13 GW but that was much lower than earlier years. The share of hydropower in renewable electricity generation is around 47 percent globally, showing that even though other renewables are expanding fast, hydropower remains a backbone. (Hydropower Facts / IHA, IEA Hydroelectricity).

Bioenergy, including solid, liquid and gaseous forms, is set to grow significantly too. The IEA’s Renewables 2024 report says bioenergy accounts for almost all renewable fuel growth through to 2030. Most of this growth shows up in industry, followed by transport and buildings. Liquid biofuels are expected to expand especially in transport as many countries already have policies supporting them. (IEA Renewables 2024 – Renewable Fuels).

Looking at all of these together, it seems clear that each sector has real advantages and also limitations. Hydropower gives reliability and scale, bioenergy gives flexibility and supports sectors where electricity isn’t enough (like some transport or industry uses). Because of that I think building a renewable energy portfolio should include more than one technology instead of putting everything into just one area.

Sector	Key Data / Growth Trends	Outlook / Opportunities	Limitations / Risks
Solar	Global solar market expected to grow 22% in 2024, reaching 544 GW (SolarPower Europe 2024). Nearly 600 GW installed in 2024, up 35% from 2023 (BloombergNEF). (SolarPower Europe, BloombergNEF)	Fastest-growing renewable, driven by falling panel costs and widespread adoption. Expected to become the largest power source by 2030.	Intermittency, land use concerns, supply chain bottlenecks (e.g. polysilicon).
Wind	Offshore wind capacity could grow 15x by 2040 if policy support continues (IEA). The UK and Denmark are global leaders. (IEA)	Major opportunities in offshore wind, with falling costs and larger turbines improving efficiency.	High capital costs, project delays, local opposition (NIMBY effect).
Hydropower	Global fleet reached 1,412 GW in 2023, adding 13 GW that year. Provides around 47% of renewable electricity globally. (IHA, IEA)	Reliable and mature technology, provides baseload power, supports grid stability.	Limited new sites, drought sensitivity, environmental impacts (ecosystems, resettlement).
Bioenergy	Accounts for almost all renewable fuel growth to 2030, especially in industry, transport, and buildings (IEA 2024). (IEA)	Provides renewable fuel for hard-to-electrify sectors like aviation and heavy industry.	Land use conflicts, emissions from some biofuels, policy dependence.

Strategies for Building a Renewable Energy Portfolio

When I thought about how to actually build a renewable portfolio, I realised there are a few options.

One way is to diversify across solar, wind, and other types so that you don’t depend on just one area. Another option is using ETFs, like the iShares Global Clean Energy ETF (ICLN) or the Invesco Solar ETF (TAN), which hold lots of renewable companies in one product. This spreads out the risk and makes it easier for someone who doesn’t want to pick individual stocks.

Direct investments are also possible. Companies like Ørsted in Denmark, Iberdrola in Spain, and NextEra Energy in the US are leaders in renewable energy. Enphase Energy is another example with its solar technology. I think a combination of ETFs for safety and direct picks for higher growth potential could be a good balance.

Example Renewable Energy Portfolio

Holdings	Allocations	Rationale	Notes / Performance
iShares Global Clean Energy ETF (ICLN)	25%	Broad exposure to solar, wind, and utilities globally. Diversifies away from single stock risk.	Volatile but captures the sector’s overall growth.
NextEra Energy (NEE)	15%	US-based, one of the largest renewable energy producers.	Strong long-term operator but exposed to interest rates.
Ørsted (DNNGY)	15%	Global leader in offshore wind, major projects in Europe and Asia.	Stable growth from government contracts.
Enphase Energy (ENPH)	10%	Innovator in solar microinverters and energy management.	High growth but very volatile.
Vestas Wind Systems (VWS)	10%	World’s largest wind turbine maker.	Exposed to supply chain costs.
Brookfield Renewable Partners (BEP)	10%	Diversified renewable portfolio (hydro, solar, wind, storage).	Adds balance and steady income potential.
Plug Power (PLUG)	5%	Green hydrogen and fuel cell developer.	Speculative, high risk but aligned with future hydrogen growth.
Cash / Short-term bonds	10%	Provides flexibility and reduces volatility.	Useful for rebalancing.

Researching and Selecting Renewable Energy Investments

One thing I noticed while looking at renewables is that research is really important. Not every company is automatically a good investment just because it’s in a growing sector. Some are heavily dependent on government subsidies, while others are still testing technologies that may or may not succeed.

I think the main things to check are; the financial health of the company, the support from government policies, and the actual technology they’re working on. For example, storage and hydrogen are exciting, but they also carry a lot of uncertainty.

Case Studies of Successful Renewable Energy Portfolios

There are already some success stories that show the potential. Ørsted is often mentioned because it changed its business from fossil fuels to becoming one of the biggest offshore wind players in the world. For example, by 2019 it had become the world’s largest producer of offshore-wind energy after phasing out coal and investing heavily in renewables. (McKinsey: Ørsted’s renewable-energy transformation) Another report noted that Ørsted has grown its offshore wind development from essentially nothing in the early 2010s to a large global pipeline, giving early investors strong returns. (Powering Past Coal: Ørsted’s profitable transformation)

Funds have also shown demand. The iShares Global Clean Energy ETF (ICLN) had large inflows during the early 2020s as more investors wanted clean energy exposure. It has outperformed many traditional energy ETFs in recent years, especially when clean-energy stocks rebound more strongly than fossil fuel ones. (NetZeroInvestor: Investor demand drives comeback for clean energy stocks)

These examples helped me see that the theme has real potential, but it also comes with risks that need managing. Ørsted’s growth shows transformation is possible but things like regulatory changes, rising costs, and supply chain issues can make things bumpy. The ICLN example shows that while demand is real, performance can swing a lot if markets turn or interest rates rise.

Future Outlook for Renewable Energy Investments

Looking ahead, the outlook for renewables still seems strong. According to the IEA’s World Energy Outlook 2024, solar PV is expected to become the largest renewable energy source before 2030, overtaking wind and hydropower as global capacity grows rapidly and policies support deployment. (IEA – Solar PV outlook)

There are still challenges though. For example, supply chains remain fragile, upfront capital costs are high, and policy uncertainty could slow down some projects. But at the same time, new opportunities are opening up. The IEA estimates that investment in battery storage climbed to about US$40 billion in 2023 (excluding EV batteries), and many regions are increasingly interested in green hydrogen as a way to decarbonise sectors that electricity alone can’t handle. (IEA – Batteries & Secure Energy Transitions; IEA – Global Hydrogen Review 2025)

For me, this shows that renewable energy is still developing and will keep creating new opportunities for investors who take the long-term view. Even though the path won’t always be smooth, the combination of falling technology costs, policy support, and growth in storage and hydrogen makes it a theme that seems worth watching.

Conclusion

Thematic investing is basically a way to connect investing with the big changes happening in the world. After researching different themes, I feel like renewable energy is one of the most interesting because it is needed for the environment, and it also has a lot of financial potential. Climate change is forcing governments and companies to act, so it makes sense that this sector will keep getting more attention.

From what I have seen, a renewable energy portfolio can give exposure to a fast-growing sector while also spreading investments across different technologies like solar, wind, hydropower, and bioenergy. I also think there is something motivating about knowing that these kinds of investments are linked to sustainability, so it feels like you are supporting something bigger than just profits.

Of course there are risks such as changes in government policy or supply chain problems, but overall, I think the growth case is strong. Doing this project made me realise that renewables are not just a short-term idea but part of a much bigger transition. That makes them a theme I would definitely want to include in a portfolio for the long-term.

Additional Resources

While I was researching this project, I came across a few resources that could be helpful for anyone who wants to learn more about renewable energy investing.

Websites like the International Energy Agency and the International Renewable Energy Agency publish reports and data that give clear updates on how fast different sectors are growing. For market news and analysis, I found Reuters and Bloomberg really useful, especially when they report on trends like solar costs falling or wind projects expanding.

For books, one recommendation is The Energy World is Flat by Daniel Lacalle, which explains how energy markets are changing and what that means for the future. Another is Renewable Energy Finance: Powering the Future by Santosh Raikar and Seabron Adamson, which looks specifically at the finance side of renewables.

In terms of tools, financial platforms like Morningstar and Yahoo Finance are good for checking ETFs such as the iShares Global Clean Energy ETF (ICLN) or individual companies like Ørsted and NextEra. For beginners like me, these tools make it easier to compare performance and understand the risks.

Finally, if someone wanted to take it further, it could also make sense to connect with a financial advisor who has experience in thematic investments. They could help balance enthusiasm for renewables with the need for diversification across other asset classes.

Final Thoughts

After doing this project, I can see that individual investors really do have a role in driving positive change. By choosing to put money into renewable energy, people are not just looking for returns, they are also supporting the global shift towards cleaner and more sustainable energy.

At the same time, I think it is important to stay informed because the renewable energy sector is constantly changing. New technologies, government policies, and even global events can make a big difference to how investments perform. For me, the key takeaway is that renewables are not a perfect investment, but they are a powerful long-term theme that connects finance with some of the biggest challenges and opportunities in the world today.