Investing in clean energy ETFs is becoming increasingly attractive due to rising global demand for renewables, driven by smart grid upgrades and supportive government policies. While clean energy ETFs initially lagged behind oil and gas ETFs, they are now gaining momentum. Recent positive returns and favorable geopolitical and economic factors indicate long-term growth potential.

Amid this backdrop, investors seeking a greener portfolio might consider buying strong clean energy ETFs, such as the iShares Global Clean Energy ETF (ICLN), Virtus Duff & Phelps Clean Energy ETF (VCLN), and Global X Renewable Energy Producers ETF (RNRG).

Clean energy is expanding rapidly, with key technologies advancing due to strong policy support and declining costs. According to the American Clean Power Association (ACP), $500 billion has been invested in U.S. clean energy over two years. The Department of Energy reports clean energy jobs grew by 142,000 in 2023, surpassing overall U.S. job growth and impacting emissions.

In 2024, solar, wind, and hydropower are projected to provide 22% of U.S. electricity, up from 21% in 2023, with a rise to 24% expected in 2025. Moreover, next-generation technologies, such as advanced nuclear and long-duration energy storage, are advancing, supported by federal funding and policies. This growth bolsters the clean energy sector and its infrastructure.

Consequently, clean energy is poised to be crucial in meeting U.S. electricity demands and fueling sector growth. Furthermore, clean energy ETFs are appealing for their diversification, lower risk, and focus on renewable sectors like solar and wind. With rising investments and positive market trends in renewables, investing in these ETFs offers promising opportunities for long-term growth.

Given this favorable backdrop, let’s evaluate the three Energy Equities ETFs picks, starting with number three.

ETF #3: iShares Global Clean Energy ETF (ICLN)

ICLN is an exchange-traded fund launched by BlackRock, Inc., and managed by BlackRock Fund Advisors. It invests globally in public equity markets, targeting stocks of companies in utilities and clean energy sectors. The fund targets growth and value stocks across diverse market capitalizations and invests in companies deemed socially responsible and environmentally conscious. It aims to track the performance of the S&P Global Clean Energy Index using a representative sampling technique.

With $2.10 billion in assets under management (AUM), ICLN’s top holding is Enphase Energy, Inc. (ENPH) with a 7.32% weighting, followed by First Solar, Inc. (FSLR), with a 6.83% weighting, and Consolidated Edison, Inc. (ED), with 6.32%. It has a total of 103 holdings.

It has an expense ratio of 0.41%, lower than the category average of 0.55%. It currently has a NAV of $14.18. ICLN’s fund outflows came in at $34.57 million over the past month.

The fund’s annual dividend of $0.22 yields 1.54% on the current share price. Its four-year average yield is 1.06%. Moreover, its dividend payouts have increased at a CAGR of 12.4% over the past three years and 3.6% over the past five years.

ICLN has gained 5.2% over the past month and 2.2% over the past six months to close the last trading session at $14.18.

ICLN’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

ICLN has a B grade for Buy & Hold, Peer, and Trade. Of the 46 ETFs in the Energy Equities ETFs group, it is ranked #12. Click here to access all of ICLN’s POWR Ratings.

ETF #2: Virtus Duff & Phelps Clean Energy ETF (VCLN)

VCLN is an exchange-traded fund launched and managed by Virtus ETF Advisers LLC, with co-management by Duff & Phelps Investment Management Co. It invests globally in public equity markets, focusing on companies in energy, technology, utilities, and clean energy sectors. The fund targets both growth and value stocks across various market capitalizations, prioritizing socially conscious companies that promote environmental responsibility. It uses fundamental and quantitative analysis with a bottom-up stock-picking approach to build its portfolio.

With $5.10 million in AUM, the fund has a total of 43 holdings. VCLN’s top holding is ENPH with an 8.38% weighting, followed by FSLR with an 8.29% weighting, and ED with 6.66%.

VCLN has an expense ratio of 0.59%, higher than the category average of 0.55%. It currently has a NAV of $18.63. Its fund outflows came in at $2.18 million over the past year.

VCLN’s annual dividend of $0.19 yields 1.01% on the current share price. Its four-year average yield is 0.59%.

VCLN has gained 11.7% over the past six months and 7.2% over the past nine months to close the last trading session at $18.61.

VCLN’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.

It has an A grade for Buy & Hold and Trade and a B for Peer. It is ranked #9 in the same group. To access all the POWR Ratings for VCLN, click here.

ETF #1: Global X Renewable Energy Producers ETF (RNRG)

RNRG is an exchange-traded fund launched and managed by Global X Management Company LLC. It invests globally in public equity markets, focusing on companies in utilities, hydroelectric power generation, solar and wind energy, alternative energy resources, biofuels, and renewable electricity producers. The fund invests in both growth and value stocks across various market capitalizations and seeks to track the performance of the Indxx Renewable Energy Producers Index using a full replication technique.

With $37.60 million in assets under management (AUM), RNRG’s top holding is PT Barito Renewables Energy Tbk (BREN) with a 7.22% weighting, followed by Centrais Eletricas Brasileiras SA-Eletrobras (ELET3), with a 6.53% weighting, and EDP Renovaveis SA (EDPR), with 6.24%. RNRG has a total of 43 holdings.

RNRG has an expense ratio of 0.65%, higher than the category average of 0.55%. It currently has a NAV of $10.69. Its fund outflows came in at $804.91 million over the past month.

The ETF pays an annual dividend of $0.15, which yields 1.39% on the current price. It has a four-year average dividend yield of 1.70%.

RNRG has gained 9.5% over the past six months and 8.8% over the past month to close the last trading session at $10.69.

RNRG’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.

RNRG has an A grade for Buy & Hold and Trade and a B for Peer. In the Energy Equities ETFs group, it is ranked #8. Click here to access all of RNRG’s POWR Ratings.

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ICLN shares were trading at $13.91 per share on Friday afternoon, down $0.27 (-1.90%). Year-to-date, ICLN has declined -10.08%, versus a 14.40% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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