10 Best Clean Energy ETFs in 2021

With the COP26 conference in the news, investing in green energy has never been more topical. You may want to invest in clean energy to combat climate change or purely for profit. Either way, keep reading to find out what the top renewable energy ETFs are.

SustainFi November 10, 2021

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Why invest in clean energy funds?

Clean energy exchange-traded funds (ETFs) invest in companies in the alternative energy space, including wind, solar, hydroelectric, geothermal, hydrogen and biofuels stocks. Unlike many diversified environmental, social, and governance (ESG) funds that invest in high-ESG-scoring stocks like Apple or Microsoft, clean energy ETFs invest in companies that are actually doing something to fight climate change.

Everybody knows that burning fossil fuels like oil, coal, and natural gas is the primary driver of global warming. With the Biden presidential win, political support for clean energy in the U.S. has increased. The cost of renewables is now comparable to fossil fuels in many places.

Energy sources with the fewest emissions – wind, solar, and hydroelectric – are receiving an influx of investment dollars and gaining consumer acceptance. Renewable energy already provides 29% of global electricity generation, and it is the fastest growing energy source in the U.S., up 90% between 2000 and 2020.

What funds invest in clean energy?

Here are the top ten clean energy ETFs by assets under management:

  • iShares Global Clean Energy ETF (ICLN)
  • Invesco Solar ETF (TAN)
  • First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
  • Invesco WilderHill Clean Energy ETF (PBW)
  • Alps Clean Energy ETF (ACES)
  • Invesco MSCI Sustainable Future ETF (ERTH)
  • SPDR S&P Kensho Clean Power ETF (CNRG)
  • Invesco Global Clean Energy ETF (PBD)
  • First Trust Global Wind Energy ETF (FAN)
  • Global X Renewable Energy Producers ETF (RNRG)

🔔 Looking for other ways to invest in climate change solutions? Consider green bonds and carbon credit funds.

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The best clean energy ETFs

Why invest in an ETF and not pick stocks? Picking single stocks is time-consuming, and you can lose it all if you make a mistake. Investing in a diversified fund is much easier, and you have many options to choose from.

Here is the list of the top ten clean energy ETFs ranked by assets under management.

Fund / TickerExpense RatioAssets ($m)2021 PerformanceHoldingsRegions
iShares Global Clean Energy ETF (ICLN)0.42%6,700-12%81U.S. (39%), Denmark (16%), Spain
Invesco Solar ETF (TAN)0.69%4,020-6%46U.S. (54%), China (22%)
First Trust NASDAQ Clean Edge Index Fund (QCLN)0.60%3,31016%53U.S. (79%), China (10%), Canada
Invesco WilderHill Clean Energy ETF (PBW)0.61%2,060-11%73U.S. (84%), China (9%)
Alps Clean Energy ETF (ACES)0.55%1,100-3%46U.S. (80%), Canada (20%)
Invesco MSCI Sustainable Future ETF (ERTH)0.55%45810%239U.S. (36%), China (23%), Japan
SPDR S&P Kensho Clean Power ETF (CNRG)0.45%4192%42U.S. (76%), Canada (8%), China
Invesco Global Clean Energy ETF (PBD)0.75%402-9%125U.S. (29%), China (7%), Germany (7%)
First Trust Global Wind Energy ETF (FAN)0.62%380-10%50Denmark (17%), Canada (15%), Spain (12%)
Global X Renewable Energy Producers ETF (RNRG)0.65%145-8%44U.S. (15%), Canada (14%), New Zealand (10%)

Learn more about each fund.

iShares Global Clean Energy ETF (ICLN)

  • Expense ratio: 0.42%
  • Best for: best clean energy ETF overall

Established in 2008, ICLN is by far the largest clean energy ETF, with over $6.7 billion in assets. ICLN tracks an index of roughly 80 clean energy companies in the biofuels, ethanol, geothermal, hydroelectric, solar, and wind industries. This is a global fund; its top three countries are the U.S. (39% of assets), Denmark (16%), and Spain (6%). ICLN’s top investments are the solar company Enphase Energy, the Danish wind turbine manufacturer Vestas Wind Systems, and the fuel cell maker Plug Power. ICLN has one of the lowest expense ratios among clean energy ETFs (0.42%).

Invesco Solar ETF (TAN)

  • Expense ratio: 0.69%
  • Best for: solar energy ETF

Although solar provides only 3% of U.S. electricity generation, it is the fastest-growing source of renewable energy. If you want to focus on solar power, TAN is the obvious choice. Launched in 2008, the ETF tracks an index of global solar energy companies, overweighing “pure-play” stocks. There aren’t many publicly traded solar businesses, so this ETF owns only about 45 companies, mainly in the U.S. and China. The top ten stocks are 60% of the fund’s assets and include popular solar names like Enphase Energy, SolarEdge, and Sunrun Inc.

However, we don’t recommend putting all of your clean energy eggs in one basket. TAN has been very volatile: the fund was up 234% in 2020 but declined 6% in 2021 through November. Solar power has relied on government subsidies and tax credits in its largest markets, the U.S. and China. Changes to subsidies have created volatility. The sector is also sensitive to changes in oil and natural gas prices.

🔔 Learn more about investing in solar.

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

  • Expense ratio: 0.60%
  • Best for: concentrated exposure to U.S. clean energy and technology stocks; a large Tesla position

Launched in 2007, QCLN has over $3 billion in assets invested across roughly 50 stocks. In addition to renewable power generators, the ETF owns suppliers of smart grid and battery technology. This ETF has the largest Tesla holding of all the clean energy funds on this list: the EV-maker is over 10% of QCLN’s assets. Other top names include lithium miner Albemarle Corp, solar stock Enphase Energy, and Chinese electric carmaker NIO. Over 55% of the fund’s assets are in just ten stocks, so don’t pick this fund if you want to diversify.

Helped by its large Tesla holding, QCLN was the best-performing clean energy ETF in 2021 so far. QCLN costs 0.60% annually, somewhere in the middle of the range among its clean energy peers.

Invesco WilderHill Clean Energy ETF (PBW)

  • Expense ratio: 0.61%
  • Best for: small and mid-cap U.S. clean energy stock exposure

The oldest clean energy ETF, PBW selects U.S.-listed companies in renewable energy and cleantech. Thanks to its proprietary selection process, PBW’s holdings go beyond the obvious pure-play wind and solar stocks. The top three holdings are a lithium-ion battery maker Enovix Corporation, fuel cell maker Bloom Energy, and Standard Lithium, a Canadian lithium stock. PBW has around 70 holdings, and the top ten are only a fifth of its assets, reducing concentration risk. Many of the stocks are small and mid-cap companies, primarily in the United States. The ETF has attracted over $2 billion in assets and costs 0.61%.

Alps Clean Energy ETF (ACES)

  • Expense ratio: 0.55%
  • Best for: North American clean energy stock exposure

A fund with over $1 billion in assets, ACES focuses on North American renewable energy and cleantech stocks. U.S. holdings are around 80% of the fund, and Canadian stocks make up the remaining 20%. Although the ETF has around 40 holdings, the top ten are over 50% of its assets. The number one holding is Tesla (7%), followed by fuel cell maker Plug Power and Enphase Energy, a solar stock. ACES is like a North American version of iShares Global Clean Energy ETF (ICLN).

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Invesco MSCI Sustainable Future ETF (ERTH)

  • Expense ratio: 0.55%
  • Best for: broad exposure to sustainable economy stocks

The Invesco MSCI Sustainable Future ETF (ERTH), formerly known as the Invesco Cleantech ETF (PZD), focuses on companies that contribute to a more environmentally sustainable economy. The ETF invests in companies along six “environmental impact themes:” alternative energy, energy efficiency, green building, sustainable water, pollution prevention and control, and sustainable agriculture. As a result, this fund is broader and more diversified than other ETFs on this list.

The fund has over 200 holdings, diversified by sector and by region. U.S. companies are only 36% of the fund’s assets. Tesla is the fund’s largest holding at over 8% of its assets. Other big holdings are the Chinese electric carmaker NIO Inc and solar stock Enphase Energy, both at around 5% of the fund.

Unlike other clean energy ETFs, ERTH is screened for environmental, social, and governance (ESG) factors.

SPDR S&P Kensho Clean Power ETF (CNRG)

  • Expense ratio: 0.45%
  • Best for: reasonably priced U.S. clean energy and cleantech exposure

The SPDR S&P Kensho Clean Power ETF (CNRG) invests in U.S.-listed clean power and cleantech companies. The fund has just forty holdings that go beyond renewable energy generators. In addition to Tesla, the number one holding, CNRG owns a lot of solar companies like Enphase Energy, First Solar, and SolarEdge. With a 0.45% expense ratio, CNRG is reasonably priced compared to most other clean energy ETFs.

Invesco Global Clean Energy ETF (PBD)

  • Expense ratio: 0.75%
  • Best for: very diversified global clean energy and cleantech exposure

This fund from asset manager Invesco targets global renewable energy and technology stocks. Because of investments in cleantech, PBD is a bit broader than many other renewables-focused funds. PBD is well-diversified by region: the U.S. is less than a third of its assets.

It is also more diversified than any ETF on the list, with investments in many mid-cap stocks. The fund has 125 holdings, and each stock is around 1% of the fund, which is unusual. The top three are fuel cell makers Bloom Energy and Plug Power, and Wolfspeed Inc, a semiconductor manufacturer.

Importantly, stocks are selected based on their potential for capital appreciation, so this fund is basically actively managed. However, because of its 0.75% expense ratio, PBD is the most expensive clean energy ETF on our list, though its performance has not outshined the others. The fund launched in 2007, attracting about $400 million in assets since then.

First Trust Global Wind Energy ETF (FAN)

  • Expense ratio: 0.62%
  • Best for: wind energy ETF

Wind already provides about 8% of U.S. electricity generation, and it is growing fast. FAN is the largest ETF that invests in the wind power industry. Around 60% of the fund is invested in “pure-play” wind companies, which are mostly located outside the U.S.; FAN’s top countries are Denmark, Canada, and Spain. The fund has 50 holdings, though the top ten are nearly half of its assets. The top three holdings are the Chinese wind power producer China Longyuan Power Group, the Danish wind power giant Orsted, and the Canadian utility Northland Power.

Like other clean energy ETFs, FAN has been very volatile. It returned over 60% in 2020, but it’s down nearly 10% in 2021 (through November). It was also down 22% in 2011 and 11% in 2018.

🔔 Learn more about investing in wind.

Global X Renewable Energy Producers ETF (RNRG)

  • Expense ratio: 0.65%
  • Best for: the most geographically diversified clean energy ETF

Launched in 2015, the Global X Renewable Energy Producers ETF (RNRG) invests in global renewable energy companies, including wind, solar, hydroelectric, geothermal, and biofuels stock. Although the fund owns only 44 stocks, it is very diversified by region: the U.S. is only 15% of the fund, followed by Canada and New Zealand. Each stock is capped at 6%, and the top three are the Spanish wind power company EDP Renewables, the Austrian utility Verbund AG, and Sunrun, a U.S. solar panel installer.

💰 Which clean energy ETF is best?

  • Broad clean energy ETF: ICLN is a diversified, relatively cheap clean energy ETF. Unsurprisingly, this is also the most popular clean energy fund with over $6 billion in assets.
  • Wind power: FAN is by far the largest wind energy-focused ETF.
  • Solar power: with over $4 billion under management, TAN is the top pick for solar power ETFs.

The risks of clean energy ETFs

Green funds outperformed in 2020 and – despite losses in 2021 – are still trading at very high valuations. Unlike a broad market index fund, clean energy funds own few stocks, often fewer than 50. And sometimes, most of the fund is invested in the top ten stocks. On top of that, many sectors these funds invest in – like solar or wind energy or electric cars – are exposed to a lot of competition and regulation.

Where to buy clean energy ETFs

M1 Finance lets you easily create custom clean energy portfolios for free. Read the review or sign up and get a year of M1 Plus for free ($125 value).

NO INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.


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Frequently Asked Questions

What is a good clean energy ETF?

The iShares Global Clean Energy ETF (ICLN) is the largest clean energy ETF, with over $6 billion in assets. It is also one of the cheapest, with a 0.42% expense ratio.

What is the best performing clean energy ETF in 2021?

First Trust NASDAQ Clean Edge Index Fund (QCLN) was the best-performing clean energy ETF in 2021, up over 16% through November.

Does Vanguard have a clean energy fund?

No, Vanguard does not offer a clean energy fund. But there are many alternatives.

Are clean energy ETFs overvalued?

Although most clean energy funds were down in 2021 following a great run in 2020, valuations remain high. ICLN, the most popular clean energy ETF, trades at a Price/Earnings ratio of over 44 times.

What is the cheapest clean energy ETF?

Fidelity Clean Energy ETF (FRNW) is currently the cheapest clean energy ETF with a 0.39% expense ratio. The iShares Global Clean Energy ETF (ICLN), a much larger fund, comes close at a 0.42% expense ratio.