Clean energy is a broad term covering renewable energy sources or zero emission sources that do not pollute the atmosphere when used, as well as energy saved by energy efficiency measures.
The most important aspect of clean energy are the environmental benefits as part of a global energy future. Clean, renewable resources preserve the world’s natural resources and also reduce the risk of environmental disasters, such as fuel spills or the problems associated with natural gas leaks.
In a broadly accepted definition, Clean energy includes Solar, Wind and hydro powered sources. Here we look at 4 Clean energy themed ETFs.
Best Clean Energy ETFs
Some of the most popular and largest EV thematic ETFs are listed in the table below
| ETF | Invesco Solar | Invesco WilderHill Clean Energy | iShares Global Clean Energy | ALPS Clean Energy |
| Exchange | NYSE | NYSE | Nasdaq | NYSE |
| Ticker | TAN | PBW | ICLN | ACES |
| Inception date | 15/04/08 | 03/03/05 | 24/06/08 | 29/06/18 |
| Denomination | USD | USD | USD | USD |
| Expense ratio | 0.69% | 0.61% | 0.42% | 0.55% |
| Fund size | 3.07b | 1.15b | 5.77b | 0.83b |
| No. of holdings | 47 | 82 | 100 | 46 |
| Top 10 holdings weighting | 58.22% | 19.4% | 52.25% | 54.21% |
| Top 10 holdings | Enphase Energy, First Solar, SolarEdge Technologies, Sunrun, GCL Technology, Xinyi Solar, Daqo New Energy, Shoals Technologies, Array Technologies, Encavis AG | First Solar, Stem Inc, Fluence Energy, Wolfspeed, Enovix Corp, Plug Power, Ameresco, Maxeon Solar, Enphase Energy, Array Technologies | Enphase Energy, SolarEdge Technologies, Vestas Wind Systems, Plug Power, Consolidated Edison, First Solar, Orsted, EDP SA, Sunrun, Xinyi Solar | First Solar, Plug Power, Enphase Energy, Sunrun, Tesla, Rivian, NexEra Energy, Northland Power, Livent Corp, Brookfield Renewable |
Comparing the Top 10 holdings across the 4 ETFs, Enphase Energy and First Solar features in all 4 ETFs. Plug Power and Sunrun features in 3 ETFs while Array Technologies, Xinyi Solar and SolarEdge Technologies features in 2 ETFs
Invesco Solar (TAN)
The Invesco Solar ETF is based on the MAC Global Solar Energy Index. The MAC Global Solar Energy Index is a global passive solar energy index of qualified solar stocks listed on specified exchanges in specified countries.
This solar index including all solar technologies (crystalline and thin-film photovoltaic solar and solar thermal), the entire value chain (raw materials, manufacturing, installers, solar plant operations, financing, etc), and related solar equipment such as power inverters, encapsulates, etc.
The index comprises pure play solar stocks with solar revenue above 2/3 and partial solar stocks, i.e., stocks with solar revenue between 1/3 and 2/3. Partial solar stocks have half the weighting of pure play solar stocks.
The top 10 holdings in TAN as of 9 Sep 2022 are as follows:
The country breakdown are as follows:
As the Invesco Solar ETF is actively managed and aims to track the MAC Global Solar Energy Index, Do also check out the latest developments of the Invesco Solar ETF at their website here before an investment is made.
Invesco WilderHill Clean Energy (PBW)
The Invesco WilderHill Clean Energy ETF is based on the WilderHill Clean Energy Index which tracks businesses that stand to benefit substantially from a societal transition toward use of cleaner energy, zero-CO2 renewables, and conservation.
For a stock to be included in the selection universe, WilderHill must identify a company as one that has a significant exposure to clean energy, or contribute to advancement of clean energy or be important to the development of clean energy.
Companies in the underlying index generally fulfil three broad criteria:
(i) help prevent pollutants such as carbon dioxide, nitrous oxide, sulfur oxide or particulates and avoid carbon or contaminants that harm oceans, land, air or ecosystems structure;
(ii) work to further renewable energy efforts and do so in ecologically and economically sensible ways, and;
(iii) incorporate the precautionary principles into their pollution prevention and clean energy efforts.
Similarly, companies in the index generally will not have their majority interests in the highest-carbon fuels: oil or coal. Large companies with interests outside clean energy may be included if they are still significant to this sector.
The reason for the low Top 10 holdings weighting of the PBW ETF is because the underlying index is broad based with no single stock exceeding 4% of the total Clean Energy Index weight.
Here are the Top 10 holdings in PBW as of 9 Sep 22:
The country and sector breakdown are as follows:
Do also check out the latest developments of the Invesco WilderHill Clean Energy ETF at their website here before an investment is made.
iShares Global Clean Energy (ICLN)
The iShares Global Clean Energy ETF tracks the S&P Global Clean Energy Index. The index is designed to measure the performance of companies in global clean energy-related businesses from both developed and emerging markets.
Hence, investing in ICLN provides access to globalised companies that produce energy from solar, wind, and other renewable sources.
The top 10 holdings in ICLN as of 9 Sep 2022 are as follows:
The sector and country breakdown are as follows:
Do also check out the latest developments of the iShares Global Clean Energy ETF at their website here before an investment is made.
ALPS Clean Energy (ACES)
The ALPS Clean Energy ETF tracks the CIBC Atlas Clean Energy Index (NACEX). The index is designed to provide exposure to a diverse set of US or Canadian based companies involved in the clean energy sector including renewables and clean technology.
The investable universe is the clean energy sector which comprised of companies that provide the products and services which enable the evolution of a more sustainable energy sector. Clean energy business segments include solar, wind, hydro, geothermal, electric vehicles, LED, biomass, smart grid, energy efficiency and storage.
Here are the Top 10 holdings as of 9 September 22.
The sector and theme allocations are as follows:
Do also check out the latest developments of the ALPS Clean Energy ETF at their website here before an investment is made.
Closing statement
Clean energy has been a focus by governments across the world, with many policies put in place over the years to achieve carbon neutral goals by a fixed timeline.
The most recent US Inflation Reduction Act shows that governments are still increasing their efforts with the act allowing the clean energy theme to benefit from tax credits, grants, and favorable loans for electrical infrastructure in the following ways:
- Clean energy production
Production tax credits for clean electricity generation and investment tax credits for new clean energy projects across wind, solar, geothermal, bioenergy, hydropower, energy storage, and clean hydrogen, as well as approximately $30 billion in grants and loans to modernize utilities and states electric infrastructure.
- Clean technology manufacturing
Production and investment tax credits of $30 billion for manufacturing solar panels, wind turbines, heat pumps, EVs, batteries, and critical minerals; $10 billion for facilities to produce them; and $6 billion (including grants) for carbon capture. Direct spending includes $7.5 billion for clean technology products and $29 billion in breakthrough energy research.
- Adoption of enabling technologies
Significant tax credits, $9 billion in rebates, and a $1 billion grant program to fund residential electrification and energy efficiency technologies, including heat pumps, rooftop solar, electric HVAC, water heaters, and home appliances.
Here, we have shared with you 4 ETFs you can consider if you wish to bet on Clean Energy. The Invesco Solar ETF has a strong solar focus while the other 3 are quite varied. The ALPS Clean Energy ETF is the only ETF that is North-American centric while the other 3 have a global investment mandate.
The ETFs provide diversification as the focus is quite different. Enphase Energy and First Solar features in all 4 ETFs. Plug Power and Sunrun features in 3 ETFs while Array Technologies, Xinyi Solar and SolarEdge Technologies features in 2 ETFs.
