Best Clean Energy ETFs

1. iShares Global Clean Energy Fund (ICLN)

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This is the largest clean energy ETF in the world with more than $4.5 billion in assets under management. More than 50% of the fund’s investments are focused on its top 10 largest holdings, including Enphase Energy Inc., First Solar, Vestas Wind Systems, Consolidated Edison, and SolarEdge Technologies Inc.

That’s something to take into consideration as a slump for these renewable energy companies can have a greater impact on the fund than the rest of the stocks combined. The iShares Global Clean Energy Fund has a score of 7 on Fidelity’s Synthetic Risk and Reward Indicator (SRRI), which is classed as “higher risk” and “potentially higher returns”.

The dividend yield is 0.54% (November 2022) and the expense ratio is 0.40%, which is relatively low compared to other alternative energy funds. iShares Global Clean Energy Fund scores high on ESG factors and its five-year return (as of May 2023) was 15.10%.

• Fund Size: $4.5 billion
• Annual Charge: 0.40%
• Dividend Yield: 0.54%
• Best for: Investors looking for an established ETF with a higher risk and reward rating.

2. Kensho Clean Power Index (CNRG)

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This clean energy ETF has a broad spread of holdings, including interests in Maxeon Solar Technologies Ltd, First Solar, General Electric Co, and Algonquin Power & Utilities Corp. Unlike some popular clean energy ETFs, Kensho has a fairly even distribution of investments, with just 16% of its portfolio in the top five holdings.

This green energy index may be suitable for those who want interests in utilities and technology. Having a stake in these areas allows the index to be at the forefront of innovations within the sector.

The fund’s risk score of 0.28 is just above the category average of 0.270 when the Equity Energy benchmark is used. This fund also has a two-star rating from Morning Star and an overall return score of 5/5 on the Lipper Leader Scorecard. Finally, the average three-year return for the Kensho Clean Power Index is 23.8%.

• Fund Size: $335 million
• Annual Charge: 0.45%
• Dividend Yield: 0.77%
• Best for: Investors who want to focus on the technology involved with green energy.

3. Invesco Solar ETF (TAN)

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The annual expense ratio for this ETF is fairly high compared to other alternative energy ETFs. That’s something to consider before you invest. However, it does own alternative energy stocks in some of the sector’s biggest names, including Enphase Energy Inc, SolarEdge Technologies Inc., and GCL Technology Holdings.

What’s also worth noting that Invesco Solar ETF focuses on the solar sector. It currently owns assets in solar-focused companies around the world. It also has a heavy slant towards IT companies (58% of its holding), which means it’s at the forefront of new solar technology.

The three-year average return for this ETF is 29.5%, and its five-year average is 22.2%. Although it scores 1/5 on the Lipper Leader Scorecard for preservation and 2/5 for its expense ratio, it scores top marks for consistent returns, giving it an overall score of 5/5.

• Fund Size: $2.2 billion
• Annual Charge: 0.66%
• Dividend Yield: 0.13%
• Best for: Investors interested in solar technology and looking for consistency.

4. First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)

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This might be one of the more expensive ETFs, but it has a vast array of holdings across multiple renewable energy-focused sectors. Overall, it has interests in 60+ companies such as Albemarle Corporation and Rivian Automotive.

This portfolio gives First Trust NASDAQ Clean Edge Green Energy Index Fund investors exposure to a variety of markets, including energy equipment, automotive, semiconductors, and diversified chemicals. Therefore, it might be the right clean energy investment if you want a highly diversified portfolio.

The annual dividend for First Trust NASDAQ Clean Edge is $0.2088, which equates to a yield of 0.46%. The average three-year return is over 21% and, between May 2020 and April 2023, its return was 85%. Finally, its risk/return score (as per the Financial Times) was more towards the higher end of the scale, but the Lipper rating was 5/5.

• Fund Size: $1.4 billion
• Annual Charge: 0.58%
• Dividend Yield: 0.46%
• Best for: Investors who want a diversified ETF with an appetite for some risk.

5. Invesco WilderHill Clean Energy ETF (PBW)

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Invesco WilderHill Clean Energy ETF is ranked among my top five clean energy ETFs because of its high dividend yield. As you can see from my list, 5.08% is above average. However, this high dividend yield does come at a cost.

This ETF owns stocks in over 80 clean energy companies and its annual expense ratio is 0.62%. Recent returns for this index have been below expectations (-22% between February and April 2023).

Despite a slump in 2022 and 2023, this ETF’s five-year average return is still 10.5%. Its risk score, as per the Financial Times, is towards the higher end of the spectrum, but it’s lower than the NASDAQ Clean Edge Green Energy Index Fund. Lipper scores are mixed, but its overall total return rating is 3/5.

• Fund Size: $1.1 billion
• Annual Charge: 0.62%
• Dividend Yield: 5.08%
• Best for: Investors looking for a clean energy ETF with a higher dividend yield.