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Best clean energy ETFs to buy in 2021
An exchange-traded fund, or ETF, offers an easy route into owning a broad selection of stocks that operate in the renewable energy industry. There are more available now than ever before and this guide helps you narrow down your options to the very best ones.
What are the top renewable energy ETFs to buy?
Our choices for the best ones to invest in right now are in the table below. You can find them through your broker simply by searching for the ETF symbol, or you can scroll down to read more about why each one was chosen.
|#||ETF symbol||ETF name|
|1||ICLN||iShares Global Clean Energy ETF|
|2||PBW||Invesco WilderHill Clean Energy ETF|
|3||CRNG||SPDR S&P Kensho Clean Power ETF|
|4||TAN||Invesco Solar ETF|
|5||QCLN||First Trust NASDAQ Clean Edge Green Energy Index Fund|
1. iShares Global Clean Energy ETF (NASDAQ: ICLN)
The iShares fund is the largest renewable energy ETF on the market at the moment and manages more than $6bn in assets. It holds stocks in companies from all over the world that generate wind and solar power in particular, along with other renewable energy sources.
First formed in 2008, the ETF has seen some of its biggest gains in the last couple of years. That reflects the growth of the clean energy sector in general but also the fact that these stocks have become so much more popular in recent times. Much of that popularity was in response to Democratic victories in the US Elections over the winter of 2020, and the expectation that they will prioritise renewables far more than their Republican predecessors.
This particular fund’s largest holdings are both in wind power – Vestas Wind and Orsted – but even combined they only make up about 15% of the ETF. That reflects its diversity and the broad range of stocks inside this ETF, which makes it one of the most stable ways to invest in clean energy.
2. Invesco WilderHill Clean Energy ETF (NYSEARCA: PBW)
The Wilderhill Clean Energy ETF takes a slightly different approach to most renewable funds. Rather than loading up its holdings with companies that produce solar or wind energy, it spreads the money out almost equally across 50 different stocks from across the globe.
That means that companies such as Lithium Americas, which runs lithium mining projects, Albemarle, which supplies lithium for electric vehicle batteries, and Daqo New Energy, a silicone manufacturer, play a larger role in this ETF than many others.
3. SPDR S&P Kensho Clean Power ETF (NYSEARCA: CRNG)
This fund focuses on companies that are listed on stock exchanges in the United States. That doesn’t mean they have to be based there, but they must have listings in the US. That means it operates from a slightly smaller pool of companies than the two ETFs above.
The other difference with this fund compared to some of the others is that its holdings are based on a couple of different indices. One tracks companies that actually produce renewable energy, the other companies that offer products or services related to renewable energy.
The practical result of that is demonstrated by its two largest holdings. First Solar manufactures solar panels and Tesla, of course, produces electric vehicles. Overall, that means the Kensho fund offers something different to many other leading clean energy ETFs.
4. Invesco Solar ETF (NYSEARCA: TAN)
Invesco Solar is the second largest ETF on the market. As its name suggests, it focuses purely on solar energy and only owns stocks in companies that produce or supply solar power.
The fund is also different in that it has larger holdings in individual companies than the ETFs we’ve covered so far. Its top two holdings, SolarEdge and Enphase Energy, make up 20% of the total fund. Together, the top 5 account for nearly half.
The laser focus on solar works both ways; it makes it less diverse than other ETFs and more reliant on the success of a single industry than is ideal. However, it also means it’s the best fund to invest in if you have high hopes for solar energy and it owns every stock that’s likely to be a part of that success.
5. First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ: QCLN)
The First Trust fund is another that only invests in companies that list in the United States. Those companies can either be ones that produce the energy itself or ones that distribute or install the technology.
The weighting of the fund is what makes this a bit different to the other options. It puts more money into larger companies, rather than balancing it out as many other funds do. That means that Tesla is its largest holding and electric vehicles in general play an outsized role in this ETF.
However, that means it offers yet another different way to invest in clean energy. The weighting is capped so it’s never too reliant on the biggest companies (the largest holding is 10% of the total), and it means you can invest in this along with other ETFs to get exposure to different sectors of the renewable energy industry.
Where to buy the best renewable ETFs
In order to get shares in any ETF you need to sign up for an online broker. ETFs trade just like regular stocks do, with their own ticker symbol (that you can find in the table above), and once you have an account you can buy or sell them at any time. These brokers are the best ones around at the moment, where you can get started in just a few minutes.
What is a clean energy ETF?
An exchange traded-fund that holds shares in companies that play a role in the research, development, manufacturing, or supply of clean energy, or related products and services. In practice those companies can vary wildly, from ones that mine raw materials to ones that make the parts to power electric vehicles.
Are clean energy ETFs a good investment?
They almost certainly will be in the long term. There’s little doubt that clean energy is going to play an ever-increasing role in our lives and an ETF offers a way of investing in the industry rather than trying to pick the right company.
In the short term, however, these ETFs can be quite volatile. That volatility has mostly seen them produce incredible results of late but renewables still make up a relatively small part of the overall energy market. Until it becomes more established and results replace hype, the ETFs might see more dramatic price swings than we would like.
Ultimately, that means it’s down to how quickly you want to see returns on your investment. If you’re willing to accept the risk of some volatility in the near term, then all you need to do is pick a broker and sign up to get started with one of the ETFs on this page.
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Fact-checking & references
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