9 Best Clean Energy ETFs to Buy Now
Billions of people around the globe rely on companies that create and deliver energy. Energy is required to keep everything operating, from the lights in your house to the gas in your car.
The high demand for energy makes it a smart choice for traders to increase their wealth. Energy exchange-traded funds are an excellent place to start investing in the energy sector.
There are two main categories of energy ETFs that you can invest in. You can put your money in renewable or non-renewable energy ETFs.
Renewable energy ETFs contain stocks and securities of companies that produce or distribute natural gas, oil, nuclear power, and coal.
Non-renewable energy ETFs contain assets from various companies that produce and distribute energy from sources such as solar, wind, water, or recycled waste.
There are numerous clean, renewable energy ETF platforms to invest in in 2023. Which clean energy ETFs to buy now? TU experts selected the best ETFs with high returns and a diversified portfolio. Learn how to make money on alternative energy.
Start investing in ETFs now with eToro!What is a clean energy ETF?
Clean energy ETFs are exchange-traded funds that invest in shares of alternative energy firms such as solar, wind, hydropower, and geothermal companies. Clean energy ETFs, like other forms of funds, can effortlessly diversify your portfolio. ETFs are also less expensive than mutual funds.
Best ETF brokers9 Best renewable energy ETFs to invest in 2024
You may also be interested in information about Best Electric Vehicles (EV) ETFs To Invest
1. iShares Global Clean Energy ETF (NASDAQ: ICLN)
The iShares fund is one of the largest renewable energy ETFs on the market, managing more than $6 billion in assets. He owns shares in companies worldwide that generate wind and solar power, particularly other renewable energy sources.
First formed in 2008, the ETF has seen some of its most significant gains in recent years. That reflects the growth of the clean energy sector and that these stocks have become much more popular recently. Much of that popularity was due to Democratic victories in the US elections during the winter of 2020 and the expectation that they will prioritize renewable energy much more than their Republican predecessors.
Management Fee - 0.40%
Assets under Management - $6B
2. Invesco WilderHill Clean Energy ETF (NYSEARCA: PBW)
The Wilderhill Clean Energy ETF takes a slightly different approach than most renewable funds. Instead of loading its holdings with companies that produce solar or wind power, it spreads the money almost equally across 50 different stocks worldwide.
That means companies like Lithium Americas, which runs lithium mining projects, Albemarle, which supplies lithium for electric vehicle batteries, and Daqo New Energy, a silicone maker, play a more prominent role in this ETF than many others.
Management Fee - 0.50%
Assets under Management - $853.40M
3. ETF Invesco Solar (TAN)
Invesco Solar is the second-largest ETF in the market. As its name suggests, it focuses solely on solar energy and only owns shares in companies producing or supplying it.
The fund is also different because it holds larger stakes in individual companies than the ETFs we've covered. Its two largest holdings, SolarEdge and Enphase Energy make up 20% of the fund's total. Together, the top 5 represent almost half.
Laser focusing on solar energy works both ways; this makes it less diverse than other ETFs and more dependent on the success of a single industry than is ideal. However, that also means it's the best fund to invest in if you have high hopes for solar power, and it holds all the stocks that could be part of that success.
Management Fee - 0.50%
Assets under Management - $2.41B
4. SPDR S&P Kensho Clean Power ETF (NYSEARCA: CRNG)
This fund focuses on publicly traded companies in the United States. That doesn't mean they have to be based there, but they do have to have listings in the United States. It operates from a slightly smaller group of companies than the two ETFs above.
The other difference with this fund is that its holdings are based on a few different indices. One tracks companies that produce renewable energy, and the other offers products or services related to renewable energy.
His two largest holdings demonstrate the practical result of this. First Solar makes solar panels, and Tesla produces electric vehicles. This means the Kensho fund offers something different from many other leading clean energy ETFs.
Management Fee - 0.09%
Assets under Management - $343.84 M
5. First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ: QCLN)
The First Trust fund is another fund that only invests in companies listed in the United States. These companies can either be those that produce the energy themselves or those that distribute or install the technology.
The fund's weighting makes it slightly different from other options. It invests more money in larger companies rather than balancing them as many other funds do. This means that Tesla is its largest holding company, and electric vehicles play an outsized role in this ETF.
However, that means it offers another way to invest in clean energy. The weighting is capped, so it's never too reliant on the biggest companies (the biggest holding is 10% of the total). That means you can invest in this along with other ETFs to get exposure to different sectors of the renewable energy industry.
Management Fee - 0.70%
Assets under Management - $1.84B
6. Invesco MSCI Sustainable Future (NYSE: ERTH)
Invesco MSCI Sustainable Future (NYSE: ERTH) invests in companies looking to use global resources more efficiently. The fund tracks the MSCI Global Environment Select Index, which chooses stocks based on various criteria, including sustainable agriculture, alternative energy, green buildings, sustainable water, energy efficiency, and pollution control.
ERTH, which began trading in October 2006, currently has 155 shares. His top 10 stocks account for about 38% of his $402 million worth.
Its subsector allocation is as follows: industry (29.87%), real estate market (18.38%), and discretionary consumption (15.90%), among others. About a third of the shares are from the US, followed by China, Japan, Denmark, Spain, and France.
Among the highlights of its portfolio are: the wind power group Vestas Wind Systems (OTC: VWDRY), the Digital Realty Trust (NYSE: DLR )
Management Fee - 0.50%
Assets under Management - $331.88M
7. The Global X CleanTech ETF (CTEC)
The Global X CleanTech ETF (CTEC) focuses on investing in firms that stand to benefit from greater adoption of technology that prevent or mitigates negative environmental impacts. It covers businesses manufacturing and delivering pollution abatement products and solutions, smart grid deployment, residential/commercial energy efficiency, and renewable energy production.
CleanTech is a dynamic theme, supporting a long-term structural shift in energy use worldwide. CTEC invests accordingly, with global exposure across multiple sectors and industries.
By 2050, cumulative investment in clean technologies is expected to reach $94 to $131 trillion, depending on the decarbonization scenario.
This ETF aims to offer investment outcomes that closely reflect the price and yield performance of the Global CleanTech Index before fees and expenses.
Management Fee - 0.50%
Assets under Management - $120.61M
8. ALPS Clean Energy ETF (ACES)
The ALPS Clean Energy ETF attempts to expose investors to a diverse array of renewable and clean energy companies based in the United States and Canada. That encompasses electric vehicles, energy management and storage, fuel cells, hydrogen and solar, wind, hydropower, geothermal, and biofuels.
As of late 2022, This ETF had approximately 50 holdings, led by the five listed below: First Solar holds 5.7% of the market, Rivian Automotive holds 5.6%, Enphase Energy holds 5.5%, Tesla holds 5.4%, and Lucid Group (NASDAQ: LCID) holds 5%.
The ETF provides a reasonable amount of diversification across industries and topics. Utilities received 29% of the allocation, followed by industrials (28%), consumer discretionary (17%), information technology (13%), energy (5%), materials (5%), and finance (2%).
Management Fee - 0.55%
Assets under Management - $574.00M
9. First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund
The First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund seeks to follow the performance of grid and electric energy infrastructure firms.
As of late 2022, This ETF had approximately 50 holdings, led by the five listed below Schneider Electric (OTCMKTS: SBGSY) holds 9.1%, Eaton Corporation (NYSE: ETN) holds 8.8% of the company, while ABB (NYSE: ABB) holds 8.6% of the company, The Enphase Power National Grid (NYSE: NGG) holds 7.2% of the company.
This ETF invests in the following industries: electrical components (26%), diversified industrials (13%), renewable energy equipment (11%), multi-utilities (8%), conventional electricity (7%), semiconductors (7%), engineering and contracting services (5%), electric components (4%), electric equipment control and filter (4%), and auto parts (4%).
Management Fee - 0.40%
Assets under Management - $717.36M
How to choose a renewable energy ETF?
There are many different factors to consider in choosing a renewable ETF. For example:
1.The investor should consider whether the fund addresses the essential ESG considerations.
2. Secondly, If it comes to the former, investors should consider a series of smaller building blocks that focus on granular E, S, or G considerations.
3. Third, If it is the latter, investors should focus on funds that capture ESG considerations holistically, such as through an aggregated "ESG score."
4. Fourth, if investors want a bit of both, a selection process based on ESG scores can be designed with other, more granular filters.
Apart from ESG filters, there are other criteria that an investor needs to look such as the fund management fee, assets, and investment directions. This helps to maximize investment returns.
What ETF to buy nowIs it a good idea to buy alternative energy ETFs now?
Energy ETFs are highly volatile, but that doesn't mean the risk isn't worth the reward. These funds are growing in demand, add diversification to your investments, and energy companies wield significant influence in the global marketplace. Here are the advantages and disadvantages of investing in ETFs.
Advantages of investing in ETFs
1. Growing demand
Power generators and distributors are part of the core industries of our society. Although the demand for natural gas and oil has recently declined rapidly over the years, it is still a vested interest for investors. Some of the biggest corporations in the US are in the renewable energy sector, with capitalizations in the billions of dollars.
2. Diversification
Buying a large volume of shares in a single significant oil and natural gas company, such as Royal Dutch Shell (RSD-A) or BP (BP), could be out of your financial reach. Energy ETFs can allow you to invest in multinationals with marginal holdings in multiple industry leaders.
Keep in mind that the energy sector is a highly volatile market. A harsh summer can dry up rivers and oceans, reducing the units of energy produced in a hydroelectric plant. A prolonged winter can directly impact the amount of solar energy used in power plants.
3. Global influence
Companies that generate and distribute energy are vital in empowering global economies. Economic powers pump energy. China produces 7,111.8 TWh, and the US produces 4,460.8 TWh of world electricity. A little interest in any of these countries' power producers elevates you to global influence and adds significant value to your financial portfolio.
Disadvantages of Investing in ETFs.
It is worth noting that investing in ETFS has some drawbacks, and any investor should understand the downside before deciding to invest. Some of the disadvantages are:
1. ETF value is affected by general market factors.
2. Some ETFs contain some risky securities that may not be obvious. Moreso, ETFs can be affected by volatility, just like any investment.
How much can I earn?
Your returns will vary based on the market's performance, regardless of where you invest. Nonetheless, the S&P 500 has generated an average annual return of roughly 10% since its inception.
This does not guarantee that you will get a 10% return on your investment every year. For example, the Vanguard S&P 500 ETF has returned more than 40% in the last year. There will be years when you make substantially smaller returns or even lose money. Yet, over time, those yearly returns should average around 10% yearly.
How To Make Money in StocksAre ETF stocks' Investments Profitable?
ETFs are profitable at various levels. If you were to buy all 500 stocks that make up the S&P 500, you would pay your broker a commission on each purchase. These commissions can add up quickly and end up having an impact on your profitability! ETFs allow you to buy all 500 shares at once and pay a single transaction fee, significantly reducing the costs of building a diversified portfolio.
The second level of profitability is related to the commissions charged by the ETF provider. These commissions are mainly intended to cover its operating costs. ETF fees start at attractive levels, and many ETF providers have reduced their fees over the years to benefit investors; even some of them currently have no commissions.
For example, from 2018-2022, the average annual S&P 500 return is 7.51%. There was an average annual of S & P 500 return of 10.41% from the period of 2013- 2022.
Best ETF Broker For Fractional SharesBest brokers to invest ETFs
RoboForex - best for ETF trading in Europe
The minimum deposit on all accounts except R StockTrader is $10. The minimum deposit for trading stocks on the R StocksTrader and copying trades on the CopyFx platform is $100. The spread on Prime and ECN accounts is floating, from 0 pips, on Pro and ProCent accounts – floating from 0. pips. You can trade over 4.000 US Stocks and ETFs with the extra low fees.
For trading, RoboForex has available the following applications: MetaTrader 4, MetaTrader 5, CTrader, and R StocksTrader, as well as its web terminal, on which you can work on real and demo accounts.
eToro - Free ETF trading in the US
The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC and eToro (UK) is licensed by the British regulator FCA. The broker also has a representative office in Australia and the USA. eToro offers over 2000 US stocks in ETF for zero fee trading.
Summary
As the sector is still in its early stage, it may be advisable to invest in it in a diversified manner through an ETF. After all, it is not yet clear which individual companies will take the lead. Through an ETF, you at least benefit from the long-term performance of the entire sector. However, it is advised that proper research helps in maximizing returns.
FAQ
Which clean energy ETF is best?
The Top five Clean Energy ETFs by Asset Size:
iShares Global Clean Energy ETF (ICLN);
Invesco Solar ETF (TAN);
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN);
Invesco Solar ETF (TAN);
SPDR S&P Kensho Clean Power ETF (CNRG).
Is iShares Global Clean Energy ETF a Good Buy?
Two stock analysts rated iShares Global Clean ETF 5 out of 5 and recommended purchasing the stock. Hence, it is a good buy.
Who are the most prominent investors in clean energy?
China invests the most in clean energy. More than $90 billion in clean energy research and development has been invested by China. The United States and Japan had the second and third greatest clean energy investments that year, with 58.9 billion and 17.90 billion USD, respectively.
Is clean energy a good investment?
Due to lowering costs for solar panels, wind turbines, and energy storage batteries, clean energy is becoming more affordable, making the sector a more appealing investment option.
Team that worked on the article
Oghenesurvwe Dibofu is a passionate writer and a contributor to the Traders Union website, who loves writing about tech, finance, and the crypto industry. Her writing style is often characterized as creative, engaging, and vibrant. She works tirelessly to learn new writing styles and deepen her knowledge of the finance industry. Her motto is “Write with passion, edit with precision.”
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
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