While the pressures of climate change continue to be a real concern, clean energy stocks have had a rather unfortunate go of things lately. In fact, the seven funds listed here have all underperformed the S&P 500 year to date — and some are even in the red as the broader market has put up double-digit gains since the start of the year.
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Past performance is not an indicator of future returns, however. And while there are plenty of unprofitable startups and uncertain spending projections as the world grapples with a low-carbon future, clean energy companies clearly have a critical role to play in the years to come.
For investors who can look beyond near-term volatility and are interested in tapping into the long-term megatrend offered by clean energy, the following ETFs are leaders with more than $100 million in assets:
| Clean energy ETF | Assets under management | Expense ratio |
| iShares Global Clean Energy ETF (ticker: ICLN) | $2.1 billion | 0.41% |
| First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID) | $1.6 billion | 0.57% |
| Invesco Solar ETF (TAN) | $980 million | 0.67% |
| First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) | $660 million | 0.59% |
| Invesco WilderHill Clean Energy ETF (PBW) | $290 million | 0.66% |
| First Trust Global Wind Energy ETF (FAN) | $190 million | 0.60% |
| ALPS Clean Energy ETF (ACES) | $200 million | 0.55% |
iShares Global Clean Energy ETF (ICLN)
Assets under management: $2.1 billion Expense ratio: 0.41%, or $41 annually on $10,000 invested
The largest and best-established clean energy ETF, this iShares fund boasts a daily volume of roughly 3 million shares and a trading history that dates back to 2008. There’s no big secret to the popularity of ICLN as it takes a diversified and global approach to clean energy investing with a portfolio of about 100 of the biggest-name stocks in the space. That includes solar and wind power firms as well as utilities with big clean energy power generation resources. It has about 35% of its portfolio in the U.S. via stocks like solar energy leaders First Solar Inc. (FSLR) and Enphase Energy Inc. (ENPH), but also invests in top players in Europe with Denmark and Spain tied for the No. 2 spot with about 9% of assets each.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
Assets under management: $1.6 billion Expense ratio: 0.57%, or $57 annually on $10,000 invested
Rather than focusing on solar, wind or clean energy power generation, GRID zeroes in on companies that are building out “smart grid” infrastructure. This is a critical part of the clean energy transition, as the intermittent nature of wind and solar requires upgraded ways to transmit and store power from renewable sources. This clean energy ETF holds companies including electric components giant ABB Ltd. (ABBN.SW) as well as utilities like National Grid PLC (NG.L) in lieu of the usual clean energy stocks.
Invesco Solar ETF (TAN)
Assets under management: $980 million Expense ratio: 0.67%, or $67 annually on $10,000 invested
Another very popular clean energy ETF is this leading fund that invests solely in solar stocks. The focused portfolio is composed of about 40 solar stocks, with just over half of assets in U.S. companies such as Enphase Energy and the rest allocated to firms overseas. China leads that international exposure, with about 16% of the portfolio represented by stocks like Xinyi Solar Holdings Ltd. that aren’t listed on major domestic exchanges. This comes with risk, given the specific focus on solar stocks as one segment of the clean energy future, as well as exposure to smaller stocks in Asia and elsewhere. But for those looking to tap into this important part of a low-carbon future, TAN is the go-to option for many investors.
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First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
Assets under management: $660 million Expense ratio: 0.59%, or $59 annually on $10,000 invested
Rounding out the leaders in alternative energy funds, this clean energy ETF is a tactical fund with only about 60 total holdings. It contains some of the same stocks as the prior funds (First Solar appears again in the top holdings), but also includes tangential plays on clean energy technology such as electric vehicle manufacturers Tesla Inc. (TSLA) and Rivian Automotive Inc. (RIVN). This broader definition of clean energy stocks may make it a less direct play than some of the other names on this list, but those looking to play some of the more dynamic names related to this megatrend may find value in this First Trust fund’s unique approach.
Invesco WilderHill Clean Energy ETF (PBW)
Assets under management: $290 million Expense ratio: 0.66%, or $66 annually on $10,000 invested
Another very broad-based clean energy ETF is this smaller Invesco fund that also includes tangential stocks as well as core alternative energy stocks. As an example, the largest of its 70 or so total positions right now is solar specialist Sunnova Energy International Inc. (NOVA), followed by electric vehicle charging network EVgo Inc. (EVGO) at about 4% allocations each. The typical firm is a small-cap stock, with holdings averaging about $1.8 billion in market capitalization, so this is a way to look beyond some of the usual suspects. That said, investors should expect more volatility as a result of this ETF’s approach, which is biased towards smaller and unconventional names.
First Trust Global Wind Energy ETF (FAN)
Assets under management: $190 million Expense ratio: 0.60%, or $60 annually on $10,000 invested
While many folks may think of solar as the go-to source for clean energy, wind power is even more popular in certain areas. According to the U.S. Energy Information Administration, wind energy generation accounts for 10% of total electricity in the United States — and overseas in the U.K., wind power is closer to 30% of total generation. This First Trust fund is a good option for investors who want to play this specific clean energy technology, with a portfolio of about 60 specialists in wind turbines and related technology. That includes Denmark’s Vestas Wind Systems A/S (OTC: VWDRY) and utilities in the region such as Orsted A/S (OTC: DNNGY). Global players represent the lion’s share of the ETF, with only about 17% of assets in U.S. companies at present.
ALPS Clean Energy ETF (ACES)
Assets under management: $200 million Expense ratio: 0.55%, or $55 annually on $10,000 invested
This ALPS ETF is unique in that is more restrictive than others by focusing on about 40 total stocks headquartered in the U.S. and Canada, but it’s also broader than others with a bunch of tangential plays in the clean energy space. That means you get a mix of stocks that includes EV manufacturers Tesla and Rivian as top positions, along with energy and water monitoring specialists Intron Inc. (ITRI). Investors looking for conventional clean energy stocks probably won’t find many such names in the ACES portfolio. But those interested in looking beyond the usual suspects may find value in this clean energy ETF.
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7 Clean Energy ETFs to Buy Now originally appeared on usnews.com
Update 09/13/24: This story was previously published at an earlier date and has been updated with new information.
