Investors are plowing money into clean energy funds as Ukraine war puts energy needs in spotlight

Published Sun, Apr 3 20229:07 AM EDT

Investors are returning to clean energy stocks after months of exiting the space as Russia's war on Ukraine shines a spotlight on energy security. Higher and volatile oil and gas prices also make the case for renewables more attractive. Renewable-energy funds saw about $642 million in inflows during March, according to data from Morningstar Direct. The activity follows three straight months of decline, that saw roughly $1.9 billion yanked from the space. Two funds attracted the lion's share of the dollars — the Invesco Solar ETF and the iShares Global Clean Energy ETF — which saw about $319.7 million and $274.9 million in inflows, respectively. The Invesco WilderHill Clean Energy ETF saw about $81.8 million in inflows, while the First Trust Nasdaq Clean Edge Green Energy ETF attracted roughly $25.8 million in inflows. The activity doesn't match squarely with broad activity across exchange-traded funds, pointing to Russia's invasion of Ukraine as a catalyst for renewed interest in the space. Funds that track the S & P 500 attracted around $6.9 billion in inflows during March. Capital also flowed into these funds in February and December, at the same time that investors were exiting renewable energy funds. "In the face of geopolitical turmoil with Russia's invasion of Ukraine, cleantech names have reacted positively," Needham said in a recent note to clients. "Solar names have benefited from rising natural gas prices and renewed focus on energy independence," the firm added. Meantime RBC noted that inflows into globally listed clean energy ETFs turned "sharply positive" in March. Drilling down on what's actually in each fund, the firm said that SolarEdge is the most popular stock across clean energy funds, with the company held in 21% of actively-managed sustainable funds. Other popular names are First Solar and Enphase Energy , which appear in 16% and 15% of funds, respectively. Hannon Armstrong is in 15% of funds, while Sunrun is in 13% of funds. The firm also looked at companies that have the largest portion of their float-adjusted market cap owned by clean energy funds — both active and passive. Sunnova , Array Technologies and TPI Composites have 16% of their tradable shares in these funds. SunPower and Shoals Technologies have 14% and 13%, respectively, of their shares in these funds. "[T]he energy situation in Europe reminds investors of the long-term trend towards renewables, now potentially accelerating further," JPMorgan said in a recent note to clients. While countries around the world are calling for more renewable energy buildout the group is facing the same headwinds impacting all areas of the economy, including rising raw material prices and supply chain bottlenecks. The Invesco Solar fund has gained 4.6% over the last month, while the iShares Global Clean Energy fund has advanced 5.5%. - CNBC's Michael Bloom contributed reporting.

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Renewable-energy funds saw about $642 million in inflows during March, according to data from Morningstar Direct. The activity follows three straight months of decline, that saw roughly $1.9 billion yanked from the space.