As the world continues to face extreme weather and many countries are still chasing the goal of “net zero” carbon emissions by 2050, you would think clean energy exchange-traded funds, or ETFs, would be a sure-thing investment.
Unfortunately, clean energy ETFs as a group have suffered significantly over the last year or so — even though the S&P 500 tacked on about 25% in 2023. This is partly due to the normal challenges with profitability in many clean-tech startups, but high interest rates have increased costs and pushed down consumer demand. Amid economic uncertainty and inflationary pressures in recent years, investing in companies that build costly clean energy installations or develop new technology simply doesn’t make short-term sense to many folks.
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That said, there’s undeniable long-term promise in this industry. The global economy is slowly but steadily weaning itself off fossil fuels, and clean energy is the only logical solution considering the rising demand for energy.
If you can look past some of the short-term volatility in the space, the following seven clean energy ETFs may be good options to gain exposure to this long-term transition around the world:
| Stock | Expense ratio |
| iShares Global Clean Energy ETF (ticker: ICLN) | 0.41% |
| Invesco Solar ETF (TAN) | 0.67% |
| First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN) | 0.58% |
| First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index (GRID) | 0.57% |
| Invesco WilderHill Clean Energy ETF (PBW) | 0.66% |
| ALPS Clean Energy ETF (ACES) | 0.55% |
| First Trust Global Wind Energy ETF (FAN) | 0.6% |
iShares Global Clean Energy ETF (ICLN)
This iShares fund is by far the best-established clean energy ETF out there. It has an inception date way back in 2008, and has a long trading history in addition to being one of the few billion-dollar clean energy ETFs out there. The fund holds all manner of clean energy stocks, including First Solar Inc. (FSLR) and Vestas Wind Systems A/S (OTC: VWDRY), and as the name implies, it covers international and domestic stocks. There are about 100 total holdings in this ETF, with U.S. companies representing about 39% followed by China at 12% and Denmark at 11%. If you want a diversified and holistic approach to alternative energy providers, ICLN is the place to start.
Assets under management, or AUM: $2.5 billion Expense ratio: 0.41%, or $41 annually on $10,000 invested
Invesco Solar ETF (TAN)
Coming in at No. 2 among clean energy ETFs is TAN, the solar fund with the clever ticker. Unlike other alternative energy funds here, this Invesco ETF goes all-in on a narrow segment of solar-related companies with only about 45 holdings — most of which have similar business models. That includes domestic leaders Enphase Energy Inc. (ENPH) and First Solar, along with Chinese companies such as JinkoSolar Holding Co. Ltd. (JKS) and Daqo New Energy Corp. (DQ). U.S. solar stocks make up about 55% of the portfolio, but there is definitely a global flavor to this clean energy ETF.
AUM: $1.3 billion Expense ratio: 0.67%
First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN)
With a good chunk of change under management and about 63 total components, this First Trust fund is another interesting and diversified way to invest in a clean energy ETF. It’s got a lot of similar names from the prior funds, such as Enphase Energy, but it also holds a healthy dose of electric vehicle firms including the iconic Tesla Inc. (TSLA) and its upstart rival Rivian Automotive Inc. (RIVN). This obviously increases the risk profile of this clean energy ETF, as the EV landscape is evolving even more rapidly than solar or wind turbine power generation, but it could be a good fit for those interested in looking beyond just power generation to broader green technology investments.
AUM: $880 million Expense ratio: 0.58%
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First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index (GRID)
This ETF is a unique twist on a clean energy future because it focuses on the infrastructure that transmits power from renewable energy sources via a “smart grid” that can adapt to the intermittent nature of wind and solar. Top components include multinational power management company Eaton Corp. PLC (ETN) and France’s Schneider Electric SE (OTC: SBGSY) that specializes in digital automation and energy management solutions. Like some of the prior funds, this clean energy ETF has a large international tilt, with about half of the stocks domiciled in the U.S.
AUM: $823 million Expense ratio: 0.57%
Invesco WilderHill Clean Energy ETF (PBW)
This clean energy ETF holds 74 equities spanning a wide array of clean energy companies — some of them directly involved in alternative energy production and others that are more tangentially involved. For instance, top holdings include EV battery firm Solid Power Inc. (SLDP) and hydrogen fuel cell systems company Plug Power Inc. (PLUG). The fund is rebalanced quarterly and typically looks at much smaller stocks than its peers on this list with an average market cap of just over $1 billion for its holdings at present. That makes PBW more aggressive, but it could get you in on the ground floor of the clean energy revolution if things go well for its holdings.
AUM: $370 million Expense ratio: 0.66%
ALPS Clean Energy ETF (ACES)
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 directly involved in the clean energy industry — including Northland Power Inc. (OTC: NPIFF), which owns and operates clean power facilities, and hydroelectric leader Brookfield Renewable Partners LP (BEP). You’ll also find the more popular clean energy stocks on this list, such as solar leader First Solar, and tangential plays that include EV stocks like Tesla. Despite this broad footprint across diverse business lines, however, ACES only holds about 40 individual stocks. It makes for a unique and more tactical approach to clean energy than any other ETF on this list.
AUM: $248 million Expense ratio: 0.55%
First Trust Global Wind Energy ETF (FAN)
The smallest of the clean energy ETFs on this list, FAN 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 (OTC: VWDRY) and utility Orsted A/S (OTC: DNNGY). If you are particularly bullish on wind turbines as part of the clean energy future, however, this ETF is a way to play about 50 leading names in the space via one diversified ETF.
AUM: $192 million Expense ratio: 0.6%
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7 Clean Energy ETFs to Buy Now originally appeared on usnews.com
Update 02/07/24: This story was previously published at an earlier date and has been updated with new information.
