Most people hold the majority of their liquid net worth in publicly-traded stocks and bonds. And unfortunately, most of these funds are held in broad market indexes, like the S&P 500, which means investors own tobacco companies, oil companies, and other investments that may not align with their values.

The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) is an exchange-traded fund (ETF) that exclusively holds clean energy companies. As a result, impact investors might consider it to help focus their portfolio on companies that align with their values.

The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) holds clean energy companies focused on manufacturing, developing, distributing, and installing emerging clean energy technologies. These technologies include solar photovoltaics, wind power, advanced batteries, fuel cells, and electric vehicles.

The fund's primary areas of focus include:

The fund's top overall holdings include:

The portfolio managers reconstitute the index twice per year, in March and September, and rebalance quarterly.

The First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) offers investors an excellent way to increase their exposure to clean energy companies with a diversified portfolio. And exchange-traded funds in general tend to have lower costs, better liquidity, and certain tax benefits relative to mutual funds.

While publicly-traded stocks are a secondary market (e.g., your money don't go directly to the business), investing in these companies sends an important signal to the wider 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 0.58% expense ratio that's lower than its ESG-focused peers (0.61%) but higher than conventional ETFs (0.41%). Notably, the fund is more expensive than the iShares Global Clean Energy ETF (ICLN) – its primary competition in the space. However, there are some big differences between the two funds.

Since the ETF is weighted by (modified) market capitalization, the portfolio is much more concentrated than conventional index funds. The ETF holds just 65 companies and the top five holdings account for nearly 40% of the overall portfolio. As a result, investors could suffer if one of those few stocks experiences a setback.

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