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Global Clean Energy ETF

Invest in a global portfolio of renewable energy assets.

Many people invest their retirement savings in publicly-traded stocks and bonds. And unfortunately, most portfolios hold broad market indexes, like the S&P 500, that include tobacco companies, oil companies, weapons manufacturers, and other unsavory businesses that may not align with their values.

The iShares Global Clean Energy ETF (ICLN) is an exchange-traded fund (ETF) that invests in a global portfolio of clean energy stocks. As a result, it's an excellent way for investors to add exposure to renewable assets and better align their portfolios with their values.

What's in the Fund?


The iShares Global Clean Energy ETF (ICLN) holds companies that produce energy from wind, solar, and other renewable sources. With nearly 100 holdings, the fund offers diversified exposure to a wide range of renewable energy companies worldwide with a low 0.40% expense ratio that beats many of its competitors.

The fund's primary areas of focus include:

  • Semiconductor Equipment (23.05%)
  • Renewable Electricity (18.74%)
  • Electric Utilities (14.75%)
  • Electrical Components & Equipment (14.27%)
  • Heavy Electrical Equipment (10.95%)

These assets are located across several countries:

  • United States (49.18%)
  • China (10.42%)
  • Denmark (9.09%)
  • Portugal (4.56%)
  • Canada (4.21%)

The fund's largest individual holdings include:

  • Enphase Energy Inc. (10.63%)
  • SolarEdge Technologie sINc. (6.60%)
  • First Solar Inc. (5.74%)
  • Consolidated Edison Inc. (5.67%)
  • Plug Power Inc. (5.48%)

Should You Invest?


The iShares Global Clean Energy ETF (ICLN) offers investors an easy way to add renewable energy exposure to their portfolios. Meanwhile, ETFs provide lower costs, better liquidity, and certain tax benefits relative to mutual funds. As a result, the fund is a cost-effective and tax-efficient option for investors.

While publicly-traded stocks are a secondary market (e.g., your money doesn't go directly to the business), investing in these companies sends an essential signal to the broader investment community. In addition, investing in clean energy companies can help lower their cost of capital, making it easier and cheaper for them to raise money.

The ETF charges a 0.40% expense ratio, significantly lower than the 0.61% ESG ETF average and well below its competitor, the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN). That said, there are some differences in sector exposure between the two funds that investors should consider before making a decision.

Of course, it's worth mentioning that market capitalization-weighted ETFs, like the ICLN ETF, are more concentrated than broad market ETFs. For example, the fund's top holdings account for nearly half of its portfolio, meaning that a downturn in an individual company could lead to problems for the entire portfolio.

The Bottom Line


The iShares Global Clean Energy ETF (ICLN) offers an excellent way to add renewable energy assets to your portfolio, but there are several risks to keep in mind. Impact investors may also want to look at the First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) as an alternative and select the best one for their portfolios.

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May 21, 2024

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Asset Class

Equity

Impact Focus

Renewable Energy

Tags

etf renewable energy

Highlights

  • Invest in a diversified global portfolio of renewable energy stocks.
  • Reduce cost with a below-average 0.40% expense ratio.