Fund Focus: have these thematic ETFs roared back to life?

Thematic exchange-traded funds (ETFs) have plenty of critics, in part because they can end up focusing on a sector just as the hype around them - and valuations - appear to reach their highest point.

That has left plenty of investors buying into exciting themes, only to see valuations to pull back pretty painfully.

But it’s not all doom and gloom. 

Savvy investors could potentially buy into thematic funds that are out of favour – and reap the rewards if they can be patient and prices eventually do recover.

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One guest on our On the Money podcast made exactly that point earlier this year – and argued that clean energy ETFs could serve as good contrarian investments.

Clean energy has certainly regained a share of the limelight this year.

Conflict in the Middle East has highlighted the need for the West to reduce its dependency on those nations that provide “traditional” sources of energy – and for renewable energy investment trusts this has translated into much stronger returns in 2026.

The artificial intelligence (AI) spending spree has also been a boost for energy demand more generally, thanks to the needs of data centres on this front.

Investors do have plenty of choice when it comes to ETFs that buy company shares in the clean energy space. But 2026 has delivered mixed results for that sector when it comes to performance.

How have we done?

The table below offers a simple look at some of the best-known clean energy ETFs, and how they have performed in the first 10 months of 2026. And these funds have delivered some very different returns.

Source: FE, as of 30/10/26. Past performance is not a guide to future performance.

Let’s first look at some of the winners of 2026. It has been a good year for the Amundi MSCI New Energy ETF Dist GBP (LSE:NRJL) ETF, which has made a total return of around 12%.

If we look at the portfolio itself, it has a good spread of exposures around the world. The US accounts for about a third of the fund, with Japan on almost 15% and plenty of exposure to different parts of Europe.

In terms of individual stocks, we get names like Schneider Electric SE (EURONEXT:SU), Iberdrola SA (XMAD:IBE), Murata Manufacturing and GE Vernova Inc (NYSE:GEV) among the top 10 holdings.

As can sometimes happen with the top-performing thematic funds, this is a notably concentrated portfolio: the top holdings are on pretty chunky allocations and the top 10 overall accounts for about two-thirds of the fund.

The L&G Clean Energy ETF USD Acc GBP (LSE:RENG) is markedly different in its approach. 

The top position in the fund accounts for a trifling 2% or so of the portfolio, meaning you get much better diversification from this option. 

Impressively, it has delivered very good returns without betting too heavily on its top names.

The fund, again, has about a third of its assets in the US, with Japan and Europe also well represented.

Bad news for the favourites

Unfortunately, a couple of major players in this space are still demanding plenty of patience from investors.

The iShares Global Clean Engy Trns ETF $ Acc GBP (LSE:INRA) became something of an investor favourite back in 2020, when demand for environment-focused funds really took off. 

It then ran into a long period of bad performance and 2026 has done it no favours on that front.

A big rival from Invesco, Invesco Global Clean Energy ETF Acc (LSE:GCLE), has also had a weak 2026. 

And the funds don’t look great on a five-year view, with the iShares ETF down by 33% and the Invesco off by an even more painful 45% or so.

This again illustrates the challenge of holding thematic funds, although it might reiterate the case for this sector as a contrarian buy. But it seems that will demand plenty of patience from investors.

• Investing in themes: what investors need to know
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It is finally worth stressing another point about thematic funds: that you don’t necessarily have to buy them, but can instead look at their portfolios as part of your own research.

This might help you to identify the shares viewed as the leading lights in the sector, while also exposing potential crowded trades.

It’s also good to remember that thematic investments are niche and often volatile – meaning they should arguably serve as smaller, “satellite” positions in a portfolio if anything.

That’s a difficult narrative to keep in mind after we have seen such strong returns from the AI theme. 

But investors should, once again, remember the merits of diversification and of sizing positions according to their potential risks.