A new trend occurring in the investment sector of finance is the eyeing of green prospects to encourage growth in the energy sector, promoting support of companies exploring clean energy solutions. Rising oil prices and controlling climate change are priorities in the minds of some investors. The exchange-traded fund offers reduced risk for socially responsible investors seeking to become a part of the solution to the problems we're facing with the planet's health at stake and the changing transportation landscape where electric-powered vehicles are taking a stronger position in the market. ETFs in green energy offer exposure to the various sectors without choosing individual stocks, diversifying the investment spread. Here are ten green EFTs worth considering.
10. Direxion Daily Global Clean Energy Bull 2x Shares
US News suggests a slightly riskier ETF for those interested in the future of clean energy. The potential for greater returns is high with Direxion Daily Global Energy listed as KLNE on the stock exchange. The underlying stocks of the ETF spread the investment exposure over companies in solar and wind, geothermal, hydroelectric, ethanol, and biofuels. It's a green leveraged ETF offering a diverse range of investments using derivatives that can reach two times daily returns with the potential for the ETF to underperform during beta slippage events compared to its unleveraged counterparts. KLNE maintains a watchful eye using swaps to attain leverage. The ETF's high MER of 1.29 percent can perform at three times of unleveraged funds. It's an ETF to consider if you're an experienced investor with plans on a short hold.
9. iShares Global Clean Energy ETF
iShares Global Clean Energy ETF is under the symbol ICLN on the exchange. We like the diverse strategy of this ETF. It has 76 holdings in various countries throughout the world. The AUM for iShares Global Clean Energy ETF is $5.6 billion, making it one of the largest ETFs in the green category. ICLN tracks its holdings comprised of solar, wind, geothermal, ethanol, biofuels, and hydroelectric companies to provide exposure to a broad sector of the clean energy sector with a global perspective. ICLN also includes investments in companies developing equipment and technologies used in the green segment. Most of the companies are mid-cap with modest price earnings. It's a specialized fund under the clean energy theme, and the cost for coming on board may be high, but the MER is 42% to hold, with a price-book ratio of 2.88 percent with a price-earnings ratio of 25.
8. Invesco Solar ETF
Invesco Solar ETF is under the symbol TAN. This exchange-traded fund is a riskier venture into pure solar energy, which takes it out of the category of diverse because it concentrates on solar energy. The volatility is higher with the potential for higher returns is attractive. The fund offers some diversity within the solar power industry with holdings in solar installers and financing arms, equipment manufacturers, solar materials production, and solar technology development. The fund offers purity under the solar energy theme. It invests in companies operating within all aspects of the solar energy industry. TAN has 52 holdings in the solar power industry. The MER is 0.66% and has an AUM of $2.7 billion.
7. Invesco WilderHill Clean Energy ETF
Nerd Wallet suggests Invesco WilderHill Clean Energy ETF listed as PBW as a green option that tracks the WilderrHill Clean Energy Index with stocks diversified across conservation and clean energy. It's among the more expensive large clean energy ETFs but it diversifies its tracking with significant holdings in Albermarle, a producer of bromine, lithium, and catalyst solutions, and Daqo New Energy Corporation's production of solar energy materials, and MYR Group, an electrical construction company. The expense ratio of 0.70% and it maintains assets under management of $2 billion in clean energy and conservation stocks.
6. First Trust Global Wind Energy ETF
First Trust Global Wind Energy ETF tracks the ISE Clean Edge Global Wind Energy Index. It's listed under FAN on the exchange. The Index measures performance of public companies across the globe in the wind energy sector. It's strongly thematic but offers some diversity with companies engaged in some aspects of the wind energy industry. The 54 holdings under management include wind farm development or management, electricity distribution, machinery and materials manufactured and distributed for the wind energy industry, and other aspects of involvement. Securities are required to have a market cap of at least s$100 million with a daily trading volume of half a million and a 25% minimum free float. Companies may be diversified with involvement in an aspect of wind energy or pure-play with at least 50% of revenues from wind-related activities. The Index is rebalanced and reconstituted every six months.
5. VanEck Vectors Low Carbon Energy ETF
The VanEck Vectors Low Carbon Energy ETF is listed under the symbol SMOG. SMOG gets a refresh quarterly. It tracks the overall performance of renewable energy companies. It maintains assets in the solar, hydro, hydrogen, wind, biofuel, lithium-ion batteries, geothermal technology, electric vehicles and related equipment production and distribution, smart grid technologies, waste-to-energy production, building and industrial materials that reduce energy consumption or carbon emissions, and other related industries. If you're looking for an extremely diversified green ETF, VanEck Vectors Low Carbon Energy ETF is among the most diversified in the clean energy sector. It tracks the MVIS Global Low Carbon Energy Index price and yield performance
4. SPDR S&P Kensho Clean Power ETF
The SPDR S&P Kensho Clean Power ETF is listed under the symbol CNRG. It provides investments that correspond to the S&P Kensho Clean Power Index return performance. The fund invests a minimum of 80% of its assets in securities comprising the index. Requirements for inclusion in the fund's asset base include companies offering products and services that drive innovation behind clean power. It is a non-diversified fund that may invest in equities securities not included in the index, including but not limited to cash, money market instruments, money market funds, and repurchase agreements.
3. KraneShares Electric Vehicle and Future Mobility ETF
Kiplinger suggests KraneShares Electric Vehicle and Future Mobility ETF, listed under the symbol KARS for investors with interests in the EV ecosystem. Holdings include companies with the EV system ranging from battery to automakers in the autonomous driving sector, charging stations, raw material production related to the industry, and more. Some of its top holdings include Contemporary Ameperex Technology, Co, the largest lithium battery maker in the world, Lucid, a recent addition to the public sector, and other holdings in the EV market. It's a focused ETF that offers diversity through the wide range of companies involved in the EV industry.
2. TrueShares ESG Active Opportunities ETF
TrueShares ESG Active Opportunities ETF is listed under the symbol ECOZ. The ETF invests in companies with low carbon footprints with a focus on companies that meet requirements for measuring greenhouse gas intensity. ECOZ is an attractive ETF in the green sector that is new to the group, established in 2020 with annualized returns of 24.2% trailing the 26.3% gain in the S&P 500.
1. iClima Global Decarbonization Transition Leaders ETF
iClima Global Decarbonization Transition Leaders ETF is listed under the symbol CLMA. The fund tracks a proprietary index of companies known for innovation in delivering services or products that have an eco-friendly impact on the world. They invest in offshore wind energy company Orsted, a plant-based foods company Oatly, and the all-electric East Japan Railway. The focus of the fund is on companies helping to find solutions to the problem of pollution and climate change by doing less harm to the environment. It's a new ETF that launched in July of 2021.
Written by Allen Lee
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