Fund for renewable energiesWhich fund fits which strategy

What are renewable energy funds?

They bundle the capital of many investors and invest it in the generation of renewable energy. Either the money flows directly into tangible assets such as wind and solar farmsin which the fund is involved. Or it flows indirectly into securities, i.e. shares and bonds of companies active in the renewable energy sector. Broader funds also take into account complementary infrastructure such as electricity grids and battery storage systems, which are necessary for a functioning energy system and also have yield potential, in addition to pure generation.

The distinction between direct and indirect investment is the most important direction for this asset class. It determines how a fund operates, the risks it bears and how closely it is linked to stock market fluctuations.

Incorrectly, renewable energy funds are often equated with sustainable funds in general or referred to as climate funds. A sustainable fund distributes its capital across many sectors and usually follows broad ESG criteria. A climate fund is aligned with the objective of reducing emissions, but can also invest in industry, real estate or transport for this purpose. A Renewable Energy Fund is narrower and specifically aims to generate electricity and heat from renewable sources.

What types of renewable energy funds are there?

They can basically be divided into two groups: those that invest indirectly through securities and those that invest directly in real assets such as wind and solar farms. On the other hand, the older classification into open-ended and closed-ended funds has lost significance since the ELTIF introduced a semi-liquid structure that cannot be clearly assigned to either category.

Within these two groups, four fund types have established themselves on the market:

• Equity and thematic ETFs: indirect investment, traded on a daily basis, low costs. But no “real” investment in renewable energies, as there is no tangible value reference
• Actively managed thematic funds: indirect investment, active selection of securities by a fund management company, with higher costs and depending on fluctuations on the stock market
• ELTIFs: direct participation in the real tangible asset, with high diversification potential. Since the ELTIF 2.0 reform, the high minimum investment amounts have usually been eliminated
• Closed-end funds and crowdinvesting: Direct involvement in individual projects, but with high concentration risk

Indirect investment: Equity and thematic ETFs

A renewable energy ETF tracks an equity index that bundles companies from the industry, such as manufacturers of wind turbines or operators of solar parks. Shares can be traded on trading days and are available for small amounts.

The benefit lies in this flexibility and the low costs, as an ETF is not actively managed. The disadvantage is the composition. Investors do not acquire a holding in an individual investment if the price of company shares also depends on stock market sentiment and interest rate levels. In addition, many indices also list utilities that have only converted part of their business under the label of renewable energies.

Indirect investment: Actively managed thematic funds

Actively managed thematic funds also invest in shares of companies from the renewable energy sector. Unlike with an ETF, this is where fund management makes the selection of securities.

This active selection usually makes the investment focus more transparent because the fund management clearly justifies which companies it invests in. However, it comes at a price: Active management incurs higher costs than with an ETF. This type of fund does not change the fundamental dependence on the stock market, as the investment remains subject to fluctuations.

Direct investment: ELTIFs

An ELTIF (European Long-Term Investment Fund) is a comparatively young fund structure through which private investors can directly invest in tangible assets. The capital flows into real assets such as wind and solar farms, which continuously produce electricity and generate cash flows from it.

ELTIFs have significantly changed the market, even though they have not yet arrived in all custody accounts. For a long time, direct access to tangible investments in renewable energies was reserved for institutional investors, while it remained blocked for private investors. The ELTIF has broken this, which is why the industry is talking about a “democratisation of the private markets”. Only through this structure can private investors seriously add renewable energies as tangible assets to their custody account and thus diversify more broadly.

One disadvantage is the limited availability. ELTIFs are semi-liquid and only redeem units in fixed time windows, the maturities of which vary between one and several years depending on the fund. The capital is thus tied up in the long term. In addition, very different funds are marketed under the term ELTIF, from the broad infrastructure portfolio to structures with a focus on private debt. The name of the ELTIF alone does not tell you exactly what the fund is all about.

Direct investment: Closed-end funds and crowdinvesting

Closed-end funds and crowdinvestment projects involve direct participation in renewable energy production facilities, usually in one or a few projects.

This makes the investment particularly tangible, because the capital flows into a clearly named project, such as a specific solar park. Crowdinvesting also involves low entry fees, often starting from 100 or 500 euros.

However, it is precisely this concentration on a few projects that is the weakness of this form of investment. If a single project fails, it cannot be made up for it, unlike a decline in the stock market. In addition to crowdinvesting, investors usually give their capital as subordinated loans: In the event of insolvency, they are only served after all other creditors, which can lead to the total loss of the investment sum. The capital is also tied up over the entire term.

Renewable energy funds: opportunities and risks

Reasonably diversified funds for renewable energies distribute the capital invested across many investments, thereby reducing the weight that an individual investment would have in the portfolio. Own risks arise from the fund structure itself, such as costs and limited availability of capital.

What are the benefits of renewable energy funds?

• Future-proof asset class: Renewable energies now account for more than half of German electricity generation, the demand for electricity continues to increase and its expansion is politically planned for the long term.
• New module in the custody account: Renewable energies are hardly represented in many portfolios to date. As their own asset class, which behaves differently from equities or bonds, they supplement a custody account with a component that is usually still missing there.
• Risk diversification: A fund allocates capital to many investments rather than a single one. If the yield of an asset is lower, for example due to a weak wind year or the failure of a project, this weighs less heavily on the overall portfolio.
• Access with manageable amounts: It is hard to build an entire portfolio of wind and solar power plants on its own. A fund makes this access possible, and this already with sums that are achievable for private investors.
• Regulated framework: Funds are subject to fixed legal requirements, from the prospectus obligation to the standardised information sheet. Private direct participation in a single project does not provide this regulated framework.
• Selection and review by the fund management: In the case of actively managed funds, fund management decides which investments and projects are included in the portfolio. Investors do not have to filter out the viable project themselves from a confusing selection.

What are the risks of renewable energy funds?

Some of the renewable energy funds do not invest in the assets themselves, but in equities of companies in the sector. This applies to ETFs and actively managed thematic funds. Anyone investing here primarily bears the risks of the equity market: The value depends on stock market sentiment, valuation level and interest rate expectations, not on the electricity yield of a specific wind or solar farm.

How pronounced this is can be seen by looking at the performance. Clean energy equity funds went through several weak years and recovered significantly in 2025.¹ These are fluctuations, as you know them from equities, and they have nothing to do with how much electricity the underlying assets actually generated. Anyone who wants to bring renewable energies into the custody account because of their own profile, which is independent of the stock market, cannot achieve this profile via indirect investment. It remains an equity investment - with all the opportunities and risks of the equity market, without exploiting the strengths of a real investment in tangible assets.

The following risks relate to direct investment in real generating assets:

• Electricity price risk: A growing part of electricity revenue depends on spot market prices, which fluctuate hourly. If many plants produce at the same time, prices fall, which is known as the cannibalisation effect. Long-term power purchase agreements and storage solutions can mitigate this.
• Weather and climate risk: Production from wind and sun is naturally weather-dependent, and the variations become greater. A strong year can be followed by a weak one and, in the long term, climate change shifts both wind patterns and solar radiation. A good location therefore does not necessarily remain good in the long term. Without geographical diversification, the investment is delivered to natural phenomena.
• Refinancing and interest rate risk: Plants for the generation of renewable energy are capital-intensive and are largely financed via loans. Rising interest rates are making new projects more expensive and making it more difficult to refinance existing systems.
• Concentration risk: Not every fund is broadly positioned. If a large part of the assets are allocated to a few investments, the loss in value of an individual position will affect the entire fund more. How well thought-out a fund is in this respect also depends on the experience of asset management.
• Liquidity risk: Wind and solar farms cannot be sold overnight. Funds in this asset class therefore operate with minimum holding periods and fixed redemption windows. These mechanisms protect the portfolio from emergency sales under time pressure. For investors, the capital is thus tied up over several years, short-term exits are usually difficult to make. For some fund types, such as closed-end funds, the capital is even tied up over the entire term.

How has the market for renewable energy funds developed?

Access for private investors has opened up significantly in recent years and the selection of funds has increased noticeably. When it comes to dealing with sustainability promises, the environment has also become more sober and stricter in response to a wave of greenwashing accusations. In addition, the first pure tangible asset funds can now demonstrate a multi-year track record that shows their performance over different market phases.

For a long time, direct participation in wind and solar farms was reserved for institutional investors, while private investors only remained the indirect route via equities and ETFs.

This has changed with the launch of the ELTIF in 2015. The ELTIF 2.0 reform, applicable since 2024, has once again opened up direct access to tangible assets of the energy transition to a wider audience. Among other things, the legally prescribed minimum investment of 10,000 euros has been omitted. The effect can be seen in the number of products: In 2025 alone, 113 new ELTIFs were launched across Europe, almost twice as many as the previous year. Assets under management increased to around 34 billion euros by the end of 2025, well over 55 percent above the previous year’s figure.

ELTIFs can hold various assets, but in Germany the capital flows mainly into infrastructure. Of the 4.4 billion euros that German investors held in ELTIFs at the end of 2025, around 60 percent were attributable to infrastructure funds in the form of an ELTIF, which also includes investments for renewable energies.

At the same time, the view of green investments has changed. In the years of the ESG boom, a fund name with terms such as “green” or “sustainable” was a selling point and the portfolio did not always cover what the name promised. Meanwhile, ESMA guidelines require that a fund can also demonstrate a sustainability concept in its name through its investments.² Sustainable funds also recorded net outflows in 2025 for the first time in years.³

What is important when selecting a renewable energy fund?

First, the strategy decides which fund type is suitable and then the quality of which specific fund within this type is convincing. Seven questions lead through both steps:

1. Direct or indirect investment: Should the capital flow into real wind and solar farms whose electricity revenue bears the value? Or in shares of companies in the sector whose price follows the stock market? 
2. Role in custody account: Should the fund be a concentrated investment in a few projects or a broadly diversified component that stabilises the custody account? 
3. Ingredients: What does the fund actually contain? Can this be verified using the key information document and investment conditions? 
4. Portfolio breadth and future viability: How widely is the fund spread across locations and technologies? Does it think about complementary infrastructure such as storage and networks? How does he market his electricity?
5. Asset Management & Track Record: How much tangible value expertise is behind the selection and operation of the systems? Can the performance be seen over several years and different market phases, or is it only prospective? Can the provider demonstrate other successful tangible asset funds?
6. Liquidity and investment horizon: Does the fund’s capital commitment match the period over which the money is not needed? 
7. Expenditure: What ongoing costs are incurred and are they proportionate to the performance of the fund type?

The first question separates indirect investment via ETFs and thematic funds from direct investment. The second question then decides within the direct investment between ELTIF and Closed-Ended Fund. The remaining five questions check whether a specific fund holds what its type promises.