With record temperatures this summer and severe droughts feeding wildfires across Canada, climate change is hardly a minor concern. While the risks are quite real, however, there is also ample opportunity for investors eager to put their money behind companies building a more sustainable future.
Of course, there are plenty of high-risk startups out there — as there are with any emerging industry like clean energy. So for those unwilling or unable to deeply research the latest technologies, trends and companies in the space, investors can simply buy a diversified clean energy exchange-traded fund, or ETF, that allows exposure to this megatrend with one simple position in their portfolio.
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The following seven clean energy ETFs all have something to offer investors looking to play the current sustainability boom and invest in a greener global economy:
| Fund | Expense ratio |
| iShares Global Clean Energy ETF (ticker: ICLN) | 0.4% |
| Invesco Solar ETF (TAN) | 0.69% |
| First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) | 0.58% |
| First Trust Nasdaq Clean Edge Smart GRID Infrastructure Index (GRID) | 0.58% |
| ALPS Clean Energy ETF (ACES) | 0.55% |
| BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD) | 0.2% |
| First Trust Global Wind Energy ETF (FAN) | 0.6% |
iShares Global Clean Energy ETF (ICLN)
This iShares fund is the most liquid and well-established clean energy ETF out there. It debuted in 2008, and currently has more than $4 billion in assets under management. It holds all manner of clean energy stocks, including First Solar Inc. (FLSR) and Vestas Wind Systems A/S (VWDRY), among others. There are about 100 total holdings in this ETF from around the world, with a little less than half of all assets in the U.S. and the rest in regions ranging from China to Denmark to Brazil. If you want a diversified and holistic approach to alternative energy providers, ICLN is the leader among clean energy ETFs.
Invesco Solar ETF (TAN)
Nearly as large at more than $2 billion in assets is TAN, which goes all-in on a narrow segment of the alternative energy market with a dedicated solar fund. Though it has only about 50 stocks in its portfolio, TAN is laser-focused on solar stocks with holdings like Enphase Energy Inc. (ENPH), First Solar Inc. (FLSR) and SolarEdge Technologies Inc. (SEDG). This tactical approach hasn’t stopped this solar ETF from finding a popular niche among investors, however, as this it remains one of the most popular clean energy ETFs despite its specialization.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
With $1.7 billion under management and 64 total components, this First Trust fund is another interesting and diversified way to play all things green energy. It’s got a lot of similar names from alternative energy companies in the portfolio but also a healthy dose of electric vehicle firms including the iconic Tesla Inc. (TSLA) and lithium leader Albemarle Corp. (ALB). This obviously increases the risk profile of this clean energy ETF, but could be a good fit for those interested in looking beyond solar and wind power to broader green technology applications.
[READ: 7 Best Electric Vehicle ETFs to Buy]
First Trust Nasdaq Clean Edge Smart GRID Infrastructure Index (GRID)
Another clean energy ETF from asset manager First Trust is GRID, which is more focused on alternative energy infrastructure than companies that make things like solar panels. Top components at present include multinational power management company Eaton Corp. PLC (ETN), industrial conglomerate Johnson Controls International PLC (JCI) and robotics and automation pioneer ABB Ltd. (ABBNY), among others. The fund is international in nature, with about half of the stocks domiciled in the U.S., giving it a very diversified and unique approach to the future of clean energy systems worldwide.
ALPS Clean Energy ETF (ACES)
Slightly smaller than the prior funds at about $500 million in assets and taking a broad approach to the notion of clean energy, this ALPS ETF delivers exposure to a diverse set of U.S. and Canadian companies involved in the clean energy industry. That includes companies directly involved in renewables and clean energy technology, but also EV manufacturers like Tesla and upstart rival Rivian Automotive Inc. (RIVN). Despite this wide reach across clean energy companies, it is also focused, having a small list of 44 stocks. Though less established than some of its peers on this list, ACES offers a unique and tactical play on the increasingly popular clean energy trend.
BlackRock World ex U.S. Carbon Transition Readiness ETF (LCTD)
A completely different way to think about clean energy, LCTD looks to offer investors broad market exposure to larger companies worldwide that are “better positioned to benefit from the transition to a low-carbon economy” through efforts including energy efficiency, water conservation and generally “green” corporate practices that benefit the planet without harming their bottom line. That includes companies like Nestle SA (NSRGY) that look to sustainably source ingredients for their products as well as energy automation specialist Schneider Electric SE (SBGSY). This is an “ex-U.S.” fund, too, meaning it willfully excludes domestic names to focus only on international players. It’s a unique strategy, but one to consider if you want a global approach to a sustainable economy.
First Trust Global Wind Energy ETF (FAN)
The smallest and perhaps most focused ETF on this list, FAN is a roughly $250 million fund that is focused on companies that support the future of wind energy worldwide. Since the U.S. is largely focused on solar energy and other alternatives, FAN is largely powered by overseas names such as Denmark’s Vestas Wind Systems A/S (VWDRY) and utilities in the region like Orsted AS (DNNGY). But if you are particularly bullish on wind turbines as part of the clean energy future, this ETF is a way to play almost 60 leading names in the space via one diversified exchange-traded fund.
[READ: 7 Best Green Hydrogen Stocks and ETFs to Buy Now]
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7 Clean Energy ETFs to Buy Now originally appeared on usnews.com
Update 07/14/23: This story was published at an earlier date and has been updated with new information.
