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The clean energy boom is new, and there’s no way to know what companies will be the belles of the ball. But rather than try to predict which specific companies will prosper, you can invest in clean energy ETFs and gain wider exposure to the industry as a whole.
What are clean energy ETFs?
Clean energy ETFs are exchange-traded funds that invest in stocks in the alternative energy sector, which might include solar energy, wind, hydroelectric and geothermal companies. Like other types of funds, clean energy ETFs can easily diversify your portfolio. ETFs also tend to be less expensive than mutual funds.
Best-performing clean energy ETFs
Below is a list of the best-performing clean energy ETFs.
» Excited about clean energy ETFs? Here are the best online brokers for ETF investing
Invesco Solar ETF
First Trust NASDAQ Clean Edge Green Energy Index Fund
iShares Global Clean Energy ETF
VanEck Low Carbon Energy ETF
ALPS Clean Energy ETF
Invesco Global Clean Energy ETF
Source: VettaFi. Data is current as of market close on August 31, 2023 and is for informational purposes only.
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Clean energy ETFs in detail
When investigating clean energy ETFs, keep in mind that expense ratios should be weighed against the fund's overall return net of fees. If multiple years of returns can justify the fee, a larger fee may be less impactful than it seems.
Need a little more information? Here are three of the biggest clean energy ETFs.
Invesco Solar ETF (TAN)
The Invesco Solar ETF has a total expense ratio of 0.69% and a majority allocation of solar energy holdings. Because this fund specializes in one form of alternative energy, it may not be as diversified as other funds that invest in various types of energy. At the time of this writing, TAN’s top three holdings include First Solar Inc., Enphase Energy and SolarEdge Technologies Inc.
» How are sustainable funds measured? Learn more about ESG
iShares Global Clean Energy ETF (ICLN)
With nearly $5 billion in assets, this ETF is the largest fund. ICLN has an expense ratio of 0.40%, and the fund earns a high “AA” MSCI ESG score, which measures the fund against environmental, social and corporate governance factors. Currently, ICLN’s top three holdings include First Solar Inc., Enphase Energy Inc. and Iberdrola SA.
Invesco WilderHill Clean Energy ETF (PBW)
Invesco WilderHill Clean Energy ETF tracks the WilderHill Clean Energy Index and is made up of stocks involved in clean energy and conservation. PBW has an expense ratio of 0.62%. Currently, its top three holdings include NaaS Technology Inc. ADR, EVgo Inc. and ReNew Energy Global PLC.
» View our list: The best EV stocks
Why invest in clean energy ETFs
Between the new White House green initiatives and a large number of automakers committing to making electric vehicles, the long-awaited “green revolution” may have arrived.
Clean energy ETFs offer access to energy companies without having to pick and choose stocks yourself. If you want, you can find clean energy ETFs that specialize in solar or wind, or just opt to invest more broadly across the alternative energy industry.
And while many of these ETFs have five years' worth of data, renewable energy is still a relatively new field. Rather than purchasing single stocks in this field ETFs spread out your risk and help diversify your portfolio. That way, you're not relying on a single company.
» Want more options? Check out the top-rated ESG funds
Data is intended for informational purposes only.
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