10 Best Clean Energy ETFs for May 2024
With the Biden Administration’s emphasis on clean energy initiatives to potentially reduce greenhouse gas emissions by 40% by 2030 and achieve net-zero — carbon neutrality — by 2050, clean energy stocks may seem to be a smart investment.
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Clean energy exchange-traded funds (ETFs) offer exposure to a wide range of clean energy stocks without betting it all on one company. ETFs invest in multiple stocks within a single industry, or several related industries, to help you create a diversified portfolio without having to manage a lot of individual investments.
10 Top Clean Energy ETFs
High global interest rates and a slow rollout of Inflation Reduction Act-financed projects have hit clean energy stocks hard over the last year, and clean energy ETFs have felt the effects. However, experts think things could turn around this year. That makes clean energy ETFs a potentially lucrative buy-and-hold investment.
These 10 clean energy ETFs are worth a look for your portfolio:
iShares Global Clean Energy (ICLN)
Price: $13.89
Assets under management: $2.25 billion
Expense ratio: 0.41%
Top five holdings: First Solar, Enphase Energy, Consolidated Edison, Iberdrola, Vestas Wind Systems
The iShares Global Clean Energy ETF, like most ETFs in this roundup, is trading near the lower end of its 52-week range of $12.88. The fund invests in companies that produce renewable energy from solar, wind and other sources. Some of its holdings include Enphase Energy, Consolidated Edison and First Solar, all clean energy companies on the S&P 500 index.
A low expense ratio of 0.41% and a 30-day SEC yield of 1.16% make this ETF a standout for 2024.
Invesco WilderHill Clean Energy ETF (PBW)
Price: $22.10
Assets under management: $319 million
Expense ratio: 0.66%
Top five holdings: First Solar, Fluence Energy, Sigma Lithium, Bloom Energy, Enovix Corp
The Invesco WilderHill Clean Energy ETF tracks the WilderHill New Energy Global Innovation Index, with at least 90% of its assets in securities on that index. The fund is heavily weighted toward small-cap stocks, which make up over 84% of the portfolio.
Invesco Global Clean Energy Holdings (PBD)
Price: $14.24
Assets under management: $117.2 million
Expense ratio: 0.75%
Top five holdings: LS Electric, Shihlin Electric & Engineering Corp., Ta Ya Electric Wire & Cable, Xinyl Solar Holdings, Toyo Tanso Co
It’s important not to confuse Invesco Global Clean Energy Holdings (PBD) with its counterpart, PBW. Both track the WilderHill Clean Energy Index, but PBD includes global companies, with U.S.-based companies making up just under 25% of its holdings and the rest diversified across China, Taiwan, South Korea, Japan, Europe and Canada.
Invesco Solar ETF (TAN)
Price: $43.59
Assets under management: $977.4 million
Expense ratio: 0.67%
Top five holdings: First Solar, Enphase Energy, NexTracker, SolarEdge, Hannon Armstrong Sustainable Infrastructure Capital
The Invesco Solar ETF, unlike its clean energy holdings, is a highly focused fund that tracks the performance of stocks on the MAC Global Solar Energy Index. The fund includes top solar companies like Enphase Energy, SolarEdge Technologies and First Solar, making it a good choice if you want to support the growing future of solar power across the continent.
ALPS Clean Energy ETF (ACES)
Price: $29.29
Assets under management: $211.79 million
Expense ratio: 0.55%
Top five holdings: First Solar, Darling Ingredients, Brookfield Renewable Partners, Itron, Albemarle Corp.
The ALPS Clean Energy ETF tracks the CIBC Atlas Clean Energy Index, focused on U.S. and Canadian companies involved in renewable energy and clean technology. With modest fees of 0.55%, this passively managed fund emphasizes thematic growth in the industry, bolstered by a belief in a sustainable future.
First Trust Global Wind Energy ETF (FAN)
Price: $16.02
Assets under management: $191.63 million
Expense ratio: 0.60%
Top five holdings: Orsted, Vestas Wind Systems, EDP Renovaveis, Northland Power, China Longyuan Power Group
The fund includes companies identified as “pure play” — directly related to producing wind power — and “diversified” companies, which are in some way related to the sustainable energy market. That makes this ETF a solid choice, especially if you are interested in supporting the growth of wind power.
First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN)
Price: $35.04
Assets under management: $747.14 million
Expense ratio: 0.59%
Top five holdings: First Solar, Tesla, ON Semiconductor, Enphase Energy, Albemarle Corp.
The First Trust Nasdaq Clean Edge Green Energy Index Fund tracks companies on the Nasdaq index that are “engaged in manufacturing, development, distribution and installation of clean energy technologies including, but not limited to, solar photovoltaics, wind power, advanced batteries, fuel cells and electric vehicles.” This makes it one of the more diversified funds on this list, covering virtually every green energy technology.
If you want to support sustainability with a largely U.S.-based fund, this ETF is one way to do so.
ProShares S&P Kensho Cleantech ETF (CTEX)
Price: $22.23
Assets under management: $4.69 million
Expense ratio: 0.58%
Top five holdings: Cummins, TPI Composites, Generac Holdings, First Solar, Arcosa
The ProShares S&P Kensho Cleantech ETF tracks the performance of stocks in the S&P Kensho Cleantech Index. U.S. companies make up 86% of holdings; the remainder are located in China, Canada and Singapore. The fund is heavily weighted toward capital goods (55.45%) and semiconductors (24.57%).
Introduced in September 2021, this ETF soared after its IPO and holds net assets of over $4 million currently, which leaves plenty of room for rebound.
Harbor Energy Transition Strategy ETF (RENW)
Price: $13.16
Assets under management: $22.38 million
Expense ratio: 0.80%
Top five holdings: Treasury securities
One of the newer ETFs on this list, the Harbor Energy Transition Strategy ETF, which supports companies devoted to leading the transition to renewable energy, was created in July 2022. It tracks the Quantix Energy Transition Index, which is comprised of futures contracts on commodities that support the transition to clean energy. Be aware of its relatively high expense ratio of 0.80%.
However, the ETF yields 3.49%, and with a price per share under $15, it’s one of the most affordable funds.
Global X Lithium & Battery Tech ETF (LIT)
Price: $46.33
Assets under management: $1.57 billion
Expense ratio: 0.75%
Top five holdings: Albemarle Corp., Mineral Resources, Pilbara Minerals, Quimica Y-SP ADR, Tesla
If you are putting your money on electric vehicles as the future of transportation, you may want to invest in the companies that provide the components that make EVs possible. The Global X Lithium & Battery Tech ETF could grow in value as demand for lithium-ion batteries for electronics and EVs grows. It gives investors broad exposure to lithium, with holdings representing every stage in the cycle, from mining to battery production.
The iShares Global Clean Energy ETF is the largest clean energy fund by total assets, according to VettaFi’s ETF database. The fund manages $2.25 billion in assets as of May 7.
Is a Clean Energy ETF a Good Investment?
With the growth of renewable energy and clean energy initiatives, clean energy ETFs would seem to be a solid investment choice now and in the future. McKinsey and Company predicted that by 2026, global renewable-electricity capacity could grow more than 80% from 2020 levels, with roughly two-thirds of that growth coming from wind and solar.
ETFs make it possible to invest in the whole industry without choosing individual stocks. Keep in mind, near-term performance may not represent the value you can ultimately derive from these investments.
In the case of clean energy stocks, it might be wise to embrace Warren Buffett’s philosophy of not buying a stock for 10 minutes if you aren’t willing to hold it for 10 years.
How To Invest in Clean Energy ETFs
You purchase ETFs through an investment brokerage, so the first step is to open an account. Once your account is open and funded, you can invest in individual ETFs or, if your broker offers it, a robo portfolio of climate-themed ETFs selected by experts.
Final Note
ETFs give investors an easy and relatively inexpensive way to support companies that promote clean energy. Speak to an investment advisor about whether clean energy ETFs are a good match for your investment goals and risk tolerance. If so, download a popular investment app, such as Fidelity or Acorns, to begin diversifying your portfolio with clean energy ETFs.
FAQ
Here are the answers to some common questions about clean energy ETFs.
What is the top clean energy ETF?
The iShares Clean Energy ETF is one of the most highly touted clean energy ETFs available for trading today. It tracks clean energy producers and related companies on the S&P 500.
Is there a clean energy ETF?
Many clean energy ETFs are available on major investment platforms and enable you to invest in renewable energy companies, electric vehicle manufacturers and other companies committed to sustainability. Some of the best-known clean energy ETFs include the Invesco Global Clean Energy fund and the iShares Clean Energy ETF.
What are the best clean energy stocks?
In addition to investing in managed ETFs, which put your money into a specific basket of stocks related to clean energy, you can also invest in individual clean energy stocks. Some companies to consider might be Enphase Energy, which is also represented in many clean energy ETFs, and EV manufacturers, like Tesla and Rivian.
Information is accurate as of May 7, 2024.
Daria Uhlig contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: 10 Best Clean Energy ETFs for May 2024
