Best clean energy ETFs: Our analysis of the landscape

Zach Stein

If you’re looking for the best clean energy ETFs to invest in, here’s our full list as of 09/25/20. With each fund, we include a brief analysis of what stands out to us. 

As we built our climate-friendly portfolios at Carbon Collective, we looked hard at all of the clean energy ETFs on the market. While they ended up being too narrowly focused on clean energy for us, they might be the right fit for your portfolio.

If you’re curious, you can check out our full list of the companies solving climate change.

Disclaimer: We’re publishing all of the following purely for informational purposes and not a recommendation to buy or sell any individual stock, bond, or fund. 

ETFs

An ETF or Exchange Traded Fund is a collection of stocks and/or bonds that a fund manager selects. Unlike a mutual fund, ETFs are generally “passively” managed, meaning the fund managers infrequently buy or sell stocks within the fund. ETFs are a good option for long term, “buy and hold” investors as they generally have much lower fees than mutual funds and are more tax efficient.

Renewable energy only ETFs

These ETFs invest in the companies that design, manufacture, and deploy renewable energy technology. They include: wind, solar, hydro, geothermal, biomass, biodiesel, and ethanol.

Note that at Carbon Collective, we are wary about ethanol. The debate is still unclear on if it is more carbon efficient overall than gasoline when you look at the fossil fuels used to grow corn.

  • COMPANY
  • TICKER
  • % CHANGE (3-YR)
  • % CHANGE (5-YR)
  • DESCRIPTION
% CHANGE (3-YR)
+23.69 %
% CHANGE (5-YR)
+15.41 %

ICLN's high AUM and low(er) fees make it a good option if you don't have time for deeper research. It invests in companies building & deploying renewable energy around the world. AUM = $1.3B. Fee = 0.46%

% CHANGE (3-YR)
N/A
% CHANGE (5-YR)
N/A

If you want to invest in the technology behind renewable energy, CNRG is a good option. It does not invest directly in power generation, but the companies innovating & manufacturing in the space. While its AUM is low, it does have low fees for the sector. AUM = $52.6M. Fee = 0.45%

% CHANGE (3-YR)
+7.73 %
% CHANGE (5-YR)
+10.56 %

If you want to directly invest in solar, wind, and battery farms, Yieldcos are your best option. YLCO invests both in global Yieldcos & companies that generate 50% of their revenue from renewable energy. AUM = $52.3M. Fee = 0.65%.

Renewable energy + decarbonization ETFs

If you want to invest even more broadly in renewable energy, checkout these ETFs. They include some of the technologies that are pushing the transition to a zero carbon economy. They will invest your savings not just in wind and solar, but in electric cars, batteries, LEDs, and fuel cells.

If you want to learn more about decarbonization, we suggest you read Dr. Saul Griffiths handbook on reaching carbon neutrality in the US.

  • COMPANY
  • TICKER
  • % CHANGE (3-YR)
  • % CHANGE (5-YR)
  • DESCRIPTION
% CHANGE (3-YR)
+34.40 %
% CHANGE (5-YR)
+22.83 %

PBW includes both renewable energy and companies in related spaces like electric cars & batteries. It is heavily focused on the US (85%) and caps any company at 4% of the fund, giving you more exposure to smaller companies. AUM = $658M. Fee = 0.70%

% CHANGE (3-YR)
+28.19 %
% CHANGE (5-YR)
+23.35 %

QCLN is more focused on decarbonization. It still invests in renewable energy generation (wind/solar), but also: advanced materials, smart grid, & energy storage / hybrid conversion. Like PBW it focuses heavily on the US (83%). AUM = $474M. Fee = 0.60%

% CHANGE (3-YR)
N/A
% CHANGE (5-YR)
N/A

Like PBW and QCLN, ACES goes beyond renewable energy to focus on broader decarbonization. It includes electric cars, batteries, fuel cells, & smart grids as well as wind and solar. AUM = $358M. Fee = 0.65%

% CHANGE (3-YR)
+19.72 %
% CHANGE (5-YR)
+16.22 %

In order to be included in SMOG a company must make 50% of its revenue from renewable energy OR energy efficiency. SMOG has lower AUM & fees that are in line with the other decarbonization ETFs. AUM = $144M. Fee = 0.62%.

% CHANGE (3-YR)
+18.83 %
% CHANGE (5-YR)
+16.14 %

PBD is the closest to an "actively managed fund." It highlights companies the fund managers believe have "potential for capital appreciation." It's threshold for inclusion is low. Companies must derive >10% of their revenue from renewable energy. AUM = $99.2M. Fee = 0.75%.

Solar + wind only ETFs

If you want to invest in just the solar industry or wind energy industry, these two ETFs are your best (and only) options. Each invests in companies that are working just in solar or wind around the world. They have no overlapping holdings, so investing in both could make sense as well.

  • COMPANY
  • TICKER
  • % CHANGE (3-YR)
  • % CHANGE (5-YR)
  • DESCRIPTION
Solar ETF
% CHANGE (3-YR)
+37.18 %
% CHANGE (5-YR)
+17.51 %

If you want to invest in just solar, TAN is your best option. It invests in companies around the world building and deploying solar technology. It favors companies for which solar is 100% of their business. It has relatively high fees but high AUM. AUM = $1.28B. Fee = 0.71%

Wind Energy ETF
% CHANGE (3-YR)
+11.02 %
% CHANGE (5-YR)
+13.99 %

If you want to invest specifically in wind-energy, FAN is your best (and only) ETF option. It's very focused in European markets with 60% going to companies who only do wind energy and 40% to companies who do wind but other things as well. AUM = $196M. Fee = 0.62%.

Nuclear energy 

Nuclear energy is key to any clean electricity grid. It produces electricity 24/7 with no air pollution. From a climate perspective, nuclear energy produces a life-cycle carbon footprint equivalent to solar and wind. If you want to invest in nuclear, here are the ETFs you can choose from.

  • COMPANY
  • TICKER
  • % CHANGE (3-YR)
  • % CHANGE (5-YR)
  • DESCRIPTION
% CHANGE (3-YR)
-5.08 %
% CHANGE (5-YR)
-2.16 %

If you are looking to invest in companies whose sole business is nuclear energy, URA is your best ETF option. It excludes some larger mining companies because they focus on more than just uranium. AUM = $158M. Fee = 0.71%

% CHANGE (3-YR)
-2.45 %
% CHANGE (5-YR)
+2.66 %

Unlike URA, NLR invests broadly in companies who are somehow involved in nuclear energy. It is very heavy on US-based utilities. While these do use nuclear power, many of these utilities still generate much of their electricity from coal and natural gas. If climate change is your goal, we suggest you avoid NLR. AUM = $18M. Fee = 0.61%.

% CHANGE (3-YR)
N/A
% CHANGE (5-YR)
N/A

URNM is focused more on uranium than nuclear energy. 82.5% of the fund is invested in miners who derive >50% of their revenue from uranium. 17.5% goes to holders of that uranium after it's mined. URNM has a very low AUM and quite high fee. AUM = $14M. Fee = 0.85%

About Carbon Collective

We began Carbon Collective after we couldn’t find anywhere to invest our retirement savings that made both ethical and financial sense in the age of climate change.

So we put together the world’s first series of climate-friendly, diversified, low-fee investment portfolios and teamed up with a world-class online brokerage platform to automatically manage them.

Imagine an index fund in a world without fossil fuels. That’s how we construct our portfolios. We swap the high-carbon parts of the stock market (fossil fuels, dirty utilities, airlines, etc.) with the companies building solutions to climate change (renewable energy, circular economy, energy efficiency, etc.).

Check out their historical performance, carbon footprint, and fees compared to common standard and ethical portfolios.

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