The global economy is rapidly transitioning to new energy sources. Due to concerns about climate change, the world is shifting away from carbon-based fossil fuels to cleaner alternative energy sources, including renewable energy. The decarbonization of the global economy will take trillions of dollars in investment each year.
Renewable energy will play a crucial role in this energy transition. Here's a closer look at how to invest in the renewable energy industry.
Why invest in clean energy stocks?
Several catalysts are powering the renewable energy sector these days. Potential benefits of investing in clean energy stocks include:
- Growth: Renewable energy sources, such as wind and solar, are growing briskly, which should continue in the coming decades.
- Climate change concerns: Increasing climate change concerns are driving the need to accelerate efforts to rapidly decarbonize the economy. It's driving many companies, especially in the technology sector, to specifically buy power produced from renewable sources.
- Social responsibility: Many companies are making renewable investments to be viewed as socially responsible global citizens.
- Government support: Governments are working to accelerate global decarbonization by proposing and passing legislation to increase investment in the sector. Many view these spending packages as only a down payment on the investment needed to decarbonize the economy. The view suggests that future legislation could further boost the country's investment level.
- Dividend income: Many clean energy producers generate predictable cash flow because they sell the electricity they produce under long-term power purchase agreements (PPAs). That enables them to pay attractive dividends to their shareholders.
Five top renewable energy stocks in 2025
Many companies focus on renewable energy, putting them in an excellent position to benefit from this investment megatrend. However, a few energy companies stand out above their peers as the best renewable energy stocks to buy. Top-tier green energy companies include:
Here's a closer look at these leading renewable energy stocks.
1. NextEra Energy
NYSE: NEE
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NYSE: BEP
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3. Clearway Energy
NYSE: CWEN
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4. First Solar
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5. Constellation Energy
NASDAQ: CEG
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Strong returns for investors
Climate change and socially responsible investing are major catalysts for the clean energy revolution. The trend will drive trillions of dollars of investment in renewable energy in the decades ahead.
Although the rising tide of clean energy should lift all boats, the top renewable energy stocks should generate some of the best returns for investors. Green energy companies that have already proven to be value creators and have the financial strength to capture opportunities should yield outsize total returns in the coming years.
FAQ
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Expert Q&A on renewable energy
The Motley Fool got the chance to chat with investing expert Professor Priya Parrish of University of Chicago Booth School of Business. Here's what Parrish had to say about investing in the renewable energy realm.
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