Summary: The world is slowly switching to more sustainable energy solutions, and a growing number of investors are thus hoping to capitalize on the growth of new energy sectors. In this guide, we present the top 3 green energy ETFs to invest in on trading platforms such as eToro.
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What are green energy ETFs?
Green energy ETFs (Exchange-Traded Funds) are investment funds that track companies involved in renewable and sustainable energy sources. They include companies engaged in solar, wind, and other forms of renewable energy production, as well as companies involved in promoting energy efficiency and relevant technologies.
Investing in green energy ETFs allows investors to gain exposure to a diversified portfolio of green energy companies without having to invest in and manage individual stocks. As such, they allow investors to align investment portfolios with their environmental sustainability goals while potentially making a profit in the renewable energy sector.
Top 3 green energy ETFs to buy in 2024
Here are our top 3 green energy ETFs to buy in 2024:
- iShares Global Clean Energy ETF (ICLN);
- Invesco Solar ETF (TAN);
- First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN).
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Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
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Let’s take a closer look at each ETF.
1. iShares Global Clean Energy ETF (ICLN)
Total Net Assets (as of February 2024): ~$2.5 billion
Fund Inception Date: June 24, 2008
The iShares Global Clean Energy ETF focuses on global companies engaged in solar, wind, and other renewable energy production, such as Enphase Energy (ENPH), First Solar (FSLR), and Vestas Wind Systems (VWDRY). The fund excels in virtually all environmental, social, and governance (ESG) categories, boasting an A-score from the MSCI ESG Fund Rating and MSCI ESG Quality Score of 7.1.
Feature note: Note, though, that the top 10 holdings account for more than 50% of the fund’s total assets.
ICLN price today
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2. Invesco Solar ETF (TAN)
Total Net Assets (as of January 2024): ~$1.3 billion
Fund Inception Date: April 15, 2008
The Invesco Solar ETF tracks companies operating within the solar energy sector, i.e., companies engaged in panel and electrical component manufacturing and installation. Some of its top holdings include Enphase Energy (ENPH), First Solar (FSLR), and SolarEdge Technologies (SEDG).
One of the fund’s strengths is its diversification. That is, more than half of its holdings are non-US-based companies, and some of them include companies in information technology, finances, etc. As such, the fund could be a solid investment for investors looking to diversify further than the green energy sector.
The Invesco Solar ETF likewise has an A rating from MSCI.
TAN price today
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3. First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
Total Net Assets (as of January 2024): ~$880 million
Fund Inception Date: February 8, 2007
The First Trust NASDAQ Clean Edge Green Energy Index Fund ETF emphasizes investments in US-based clean energy enterprises. It encompasses companies involved in the manufacturing, development, and installation of various clean energy solutions, including electric vehicles (EVs). Some of its top holdings include First Solar (FLSR), Tesla (TSLA), and Albemarle Corp (ALB).
The ETF has an A rating for ESG from MSCI.
QCLN price today
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Where to buy green energy ETFs?
To invest in green energy ETFs, we recommend eToro, a leading investment platform with millions of active users and investment features, including:
- Commission-free stock trading;
- Access to over 2,000 stocks from 17 different exchanges;
- The option to purchase fractional shares;
- Charting tools;
- A user-friendly platform that simplifies the trading experience.
Highly Rated Stock Trading & Investing Platform
-
Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.
-
0% commission on buying stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.
-
Copy top-performing traders in real time, automatically.
-
eToro USA is registered with FINRA for securities trading.
Pros and cons of investing in green energy ETFs
Pros
- Diversification: Green energy ETFs track numerous stocks within the renewable energy industry;
- Growth opportunities: The growing emphasis on renewable energy sources could allow investors to capitalize on their growth potential;
- Socially responsible investing: Green energy ETFs align with ESG values and support companies involved in clean energy production;
- Accessibility: ETFs are traded on stock exchanges, and they’re often highly liquid.
Cons
- Concentration Risk: Some green energy ETFs may have concentrated holdings in specific sectors, and sometimes a minority of holdings has the biggest impact on the fund’s performance;
- Sector-specific risks: ETFs focused on the green energy sector could suffer if regulatory changes, technological issues, or other factors affect companies within the sector;
- Tracking errors: Tracking errors can occur, so the fund’s performance may deviate from that of the underlying index.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about investing in green energy ETFs
What is a green energy ETF?
A green energy exchange-traded fund is an investment fund that tracks stocks related to the renewable energy industry.
What is the best way to invest in green energy?
The best way to invest in green energy is to invest in companies involved in the production and distribution of sustainable energy solutions. You can do so by investing in individual stocks or by investing in exchange-traded funds that track them.
How can I buy and sell green energy ETFs?
Since they are traded as stocks, green energy ETFs can be bought and sold through a brokerage account.
Are there any green energy ETFs?
Yes, there are green energy ETFs. For example, iShares Global Clean Energy ETF (ICLN), Invesco Solar ETF (TAN), and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN).
How to invest in green energy ETFs?
To invest in green energy ETFs, you can open a trading account on an online investment platform such as eToro.
What is the largest green ETF?
The largest green ETF is the iShares Global Clean Energy ETF (ICLN).
Is clean energy ETF a good investment?
Investing in a clean energy ETF can be a good way to diversify and satisfy your ESG investment requirements.
