Interest and investment in clean energy has been steadily growing. Here we’ll review the best clean energy ETFs to go green in your portfolio.
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In a hurry? Here’s the list:
- ICLN – iShares Global Clean Energy ETF
- PBW – Invesco WilderHill Clean Energy ETF
- QCLN – First Trust NASDAQ Clean Edge Green Energy Index Fund
- PZD – Invesco Cleantech ETF
- FAN – First Trust Global Wind Energy ETF
- ACES – ALPS Clean Energy ETF
Introduction – Why Clean Energy?
Development, innovation, interest, and investment in clean energy has been on the rise with fossil fuels [hopefully] on the way out. Increasing energy demands from emerging markets around the globe will expedite the transition. Moreover, state and federal subsidies and tax credits will continue to accelerate the adoption of green energy initiatives.
Think solar, wind, hydroelectric, geothermal, etc., as well as the tech that services those specific resources. Things like solar panel installations and electric vehicle sales are at record highs. Diversification is important in investing in clean energy due to the fact that some of the underlying companies can easily go under. Below are the best clean energy ETFs to access diversified exposure to the market segment.
The 6 Best Clean Energy ETFs
Below are the 6 best clean energy ETFs:
ICLN – iShares Global Clean Energy ETF
The iShares Global Clean Energy ETF (ICLN) is the most popular ETF in this space, with over $1.3 billion in assets. This fund provides broad, global exposure to the clean energy market segment with 31 companies involved in wind, solar, hyrdroelectric, and other alternative energy sources, as well as companies that provide clean energy tech.
The fund is well-diversified globally, with significant holdings in Canada, New Zealand, Hong Kong, Brazil, and more, with only about 40% in the United States. Its largest exposures are renewable energy equipment and services, electric utilities, and power producers. The fund seeks to track the S&P Global Clean Energy Index and has an expense ratio of 0.46%.
PBW – Invesco WilderHill Clean Energy ETF
The Invesco WilderHill Clean Energy ETF (PBW) is another popular broad clean energy ETF, with comparatively more of a tech, industrial, and manufacturing focus than ICLN above, with less exposure to pure energy plays like utilities and power producers. While this fund’s sector exposure can be considered broader than ICLN, PBW’s geographic exposure is less diverse, with its holdings almost entirely in the United States (86%) and China (9%). The fund was established in 2005 and seeks to track the WilderHill Clean Energy Index. This ETF has 42 holdings and an expense ratio of 0.70%.
QCLN – First Trust NASDAQ Clean Edge Green Energy Index Fund
The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) seeks to track the NASDAQ Clean Edge Green Energy Index. This ETF is even more tech-focused than PBW above, investing in manufacturers, developers, distributors, and installers of materials, energy tech, energy storage and conversion, or renewable electricity production. The fund has 43 holdings and an expense ratio of 0.60%.
PZD – Invesco Cleantech ETF
The Invesco Cleantech ETF (PZD) is an equal-weighted index of clean tech, with more exposure to small-caps, industrials, and technology. The fund seeks to track the Cleantech Index and has an expense ratio of 0.68%.
FAN – First Trust Global Wind Energy ETF
Interested in specifically targeting wind energy? The First Trust Global Wind Energy ETF (FAN) is the only ETF to provide narrow exposure to wind energy. The fund has 47 holdings diversified well across the globe, and seeks to track the ISE Global Wind Energy Index. This ETF has an expense ratio of 0.62%.
ACES – ALPS Clean Energy ETF
The ALPS Clean Energy ETF (ACES) seeks to track the CIBC Atlas Clean Energy Index, a market-cap-weighted index providing exposure to the clean energy sector in North America. The fund has 33 holdings across the United States (75%) and Canada (25%). It has an expense ratio of 0.65%.
Where to Buy These Clean Energy ETFs
All these ETFs should be available at any major broker. My choice is M1 Finance for U.S. investors. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a modern, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here. Investors outside the U.S. can find the ETFs above on eToro.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.