Clean energy technologies will be one of the best ways to fight climate change going forward as they’ll allow people to burn less fuel while maintaining their current lifestyles. Clean energy exchange-traded funds (ETFs) give investors a way to add some of these new and emerging technologies to their portfolios. We’ve built this list of the five best clean energy funds, listed in no particular order, by reviewing dozens of funds and examining factors like: expense ratio, assets under management (AUM), historical returns, and liquidity. The fund also has the lowest expense ratio of any fund on this list, with its net expense ratio coming to 0.46%, equivalent to $4.60 per $1,000 invested. It’s performed well, gaining 38.67% over the past three years—trailing its benchmark, the S&P Global Clean Energy Index, by 0.2%. While the iShares ETF primarily invests in utilities, it also invests in industrial and technology companies responsible for the development of clean energy technology. The fund also invests in the manufacturing of solar panels and other necessities for clean energy production. This gives investors some more diversification than they would receive through funds that focus solely on energy production. The fund has $1.8 billion under its management, meaning investors needn’t worry about liquidity when they want to buy and sell shares. Its expense ratio, however, is on the higher end at 0.70%, equal to $7 for every $1,000 invested. According to an analysis by ETF.com, the fund’s strengths include its exposure to pure-play clean energy companies but also ancillary service providers to clean energy companies. This improves diversification within the fund. The fund has $2.2 billion in assets under its management and an expense ratio of $0.60, equal to $6 for every $1,000 invested. Its portfolio includes 53 different companies. An analysis from ETF Database argues that one of the fund’s best features is its broad portfolio, which focuses on companies in multiple sectors of green energy. The fund has $470.8 million under its management and an expense ratio of 0.58%, equivalent to $5.80 for every $1,000 invested. This fund gives investors who want exposure to clean energy a way to invest without putting all of their money in one industry. Its diversification into other businesses that promote sustainability gives the fund some valuable diversification. This also exposes the fund to businesses that are poised to grow as sustainable living becomes more popular. The fund has just $120.1 million under management, which can be a concern, as this suggests not too many investors have shown interest in it. Its expense ratio is 0.65%, which is equivalent to $6.50 for every $1,000 invested. With many people focused on climate change, renewable energy companies have the potential to become a more important part of energy production around the world. This, in turn, gives such businesses the potential to grow in the future. While historical performance doesn’t guarantee future results, it can be useful to look at how some investments performed in the past to predict their future potential.
Is a Clean Energy ETF Right for Me?
Investors who want to buy shares in a clean energy ETF should think about why they’re considering clean energy investing. Is your primary goal to earn a profit? Consider all of the funds available, how they can fit into your portfolio, and whether they’ll help you achieve your investing goals. Are you investing in clean energy because you want to support companies that are fighting climate change? You’ll have to make a personal decision about whether investing with your personal ethics is worth adjusting your investment strategy. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. Most clean energy ETFs hold shares in businesses, which means they can be volatile. If you’re investing for the short term, this volatility may be difficult to handle.
