So you might be wondering, what are the Best Clean Energy ETFs for 2022? Clean energy has been in the spotlight in recent years as governments and corporations around the world work to reduce GHG emissions. Some of the technologies at the forefront of the world’s transition to sustainable energy include solar, wind, hydrogen, RNG, and electric vehicles (EVs).
On April 22, 2016, the Paris Climate Agreement under the UNFCCC took affect. This international agreement was signed by 196 parties with the goal to limit global GHG emissions. The longer term goal is to limit global warming to 1.5 degrees celsius. For the purpose of, achieving climate neutrality by mid-century (2050).
According to Allied Market Research, the global renewable energy market was valued at $887.7 billion in 2020. Allied Market Research projects the market to grow at a CAGR of 8.4% from 2021 – 2030. Picking individual stocks can be tricky for most beginner investors, and doing research can also be time consuming. Clean energy ETFs could help simplify this process.
Below we will present our top 7 Best Clean Energy ETFs to consider for 2022!
What Are Clean Energy ETFs?
Clean Energy ETFs are Exchange-Traded Funds that invest into publicly-traded companies that operate clean energy businesses and or hold clean energy assets. Investors most commonly seek out ETFs to track the performance of a particular sector they’re interested in. However, ETFs are not the only way to invest in clean energy.
Clean Energy ETF List
Below we will list our top 7 clean energy etfs and compare them to one another.
- iShares Global Clean Energy ETF (ICLN)
- Invesco Solar ETF (TAN)
- First Trust NASDAQ Clean Edge Index Fund (QCLN)
- Invesco WilderHill Clean Energy ETF (PBW)
- Invesco MSCI Sustainable Future ETF (ERTH)
- First Trust Global Wind Energy ETF (FAN)
- Global X Renewable Energy Producers ETF (RNRG)
Investing in Clean Energy ETFs in 2022 (ETF Comparison)
iShares Global Clean Energy ETF (ICLN)
- Assets Under Management: $4.85 billion
- Expense Ratio: 0.42%
iShares Global Clean Energy ETF is the largest clean energy ETF, with $4.85 billion in AUM. ICLN launched on June 24th, 2008. The fund is global and invests primarily in clean energy companies in the United States and Denmark.
The investment objective of the fund is to track the performance of global equities in the clean energy sector. ICLN’s largest sector portfolio weighting is in utilities, followed by technology and industrials. iShares Global Clean Energy ETF ranks in the 92nd percentile within its peer group, and in the 96th percentile within the global funds of MSCI ratings.
Additionally, ICLN has an MSCI ESG Fund rating of AAA, based on a ESG quality score of 9.25 out of 10.
ICLN Top 5 Holdings:
- Vestas Wind Systems A/S (VWS) – 7.61%
- Orsted A/S (ORSTED.CO) – 7.43%
- Enphase Energy Inc (ENPH) – 7.12%
- NextEra Energy Inc (NEE) – 4.29%
- Xcel Energy Inc (XEL) – 4.18%
First Trust NASDAQ Clean Edge Index Fund (QCLN)
- Assets Under Management: $2.10 billion
- Expense Ratio: 0.60%
First Trust NASDAQ Clean Edge Index Fund is the second largest clean energy ETF, with 2.10 billion in AUM. QCLN launched on February 8th, 2007. The fund invests primarily in clean energy companies in the United States.
The investment objective of the fund is to track investment performance of United States equities in the clean energy sector. The fund’s largest sector portfolio weighting is in renewable energy equipment, followed by semiconductors and EVs (Electric Vehicles). First Trust NASDAQ Clean Edge Index Fund ranks in the 44th percentile within its peer group, and in the 30th percentile within the global funds of MSCI ratings.
Additionally, QCLN has an MSCI ESG Fund rating of A, based on a ESG quality score of 6.75 out of 10.
QCLN Top 5 Holdings:
- ON Semiconductor Corporation (ON) – 8.57%
- Tesla Inc (TSLA) – 7.82%
- Albemarle Corporation (ALB) – 7.28%
- Enphase Energy Inc (ENPH) – 7.86%
- Nio Inc (NIO) – 6.00%
Invesco Solar ETF (TAN)
- Assets Under Management: $1.98 billion
- Expense Ratio: 0.69%
Invesco Solar ETF is the third largest clean energy ETF, with 1.98 billion in AUM. TAN launched on April 15th, 2008. The fund invests primarily in solar energy and clean-tech companies in the United States and China.
The investment objective of the fund is to track investment performance of global equities in the solar energy business. Invesco solar fund’s largest sector portfolio weighting is in solar energy technology, followed by utilities and basic materials. Invesco Solar ETF ranks in the 55th percentile within its peer group, and in the 44th percentile within the global funds of MSCI ratings.
Additionally, TAN has an MSCI ESG Fund rating of AA, based on a ESG quality score of 7.27 out of 10.
TAN Top 5 Holdings:
- Enphase Energy Inc (ENPH) – 11.34%
- SolarEdge Technologies Inc (SEDG) – 10.01%
- Sunrun Inc (RUN) – 7.18%
- Xinyi Solar Holdings Ltd (0968.HK) – 6.88%
- First Solar Inc (FSLR) – 6.21%
Benefits of Investing in Clean Energy ETFs:
- Easy access to the clean energy market, without the hassle of researching individual stocks.
- Can be less volatile than investing into individual clean energy companies.
- Relatively low expense ratio, in comparison to actively managed mutual fund products.
- Increased diversification across the clean energy value chain.
- Clean energy ETFs are relatively tax efficient investment vehicles, as they invest passively and realize fewer capital gains.
Best Clean Energy ETFs: Final Takeaway
Clean energy and sustainable investing is becoming the norm, as governments, corporations and consumers demand for immediate change. Impacts of climate change have led to catastrophic changes in the earth’s atmosphere over the past century. This has fostered hotter temperatures, increased droughts, rising sea levels, loss of species and food insecurity, making ESG a priority.
This is where clean energy comes into play, to mitigate the impacts that climate change has on the natural environment. However, achieving this goal won’t come easy. Therefore, investors can show their support for change by investing into clean energy ETFs to help shape the earth future.
Disclosure: The author holds no position mentioned in this article. Freedom Stocks has a disclosure policy.
