10 Best Clean Energy ETFs: August 2021
Despite the financial crisis resulting from the pandemic, global demand for renewable energy increased in 2020. With many global renewable power capacity additions on the way, experts forecast significant growth for this sector.
The new clean energy boom has been encouraged by the current administration. Just last April, U.S. President Joe Biden announced he’s planning on reducing greenhouse emissions by up to 50-52% before 2030. Some states have already started offering incentives for those who go solar.
It’s still too soon to predict which green energy companies will benefit the most from this newfound growth. However, investing in clean energy ETFs is an excellent way to gain more exposure to the renewable energy industry.
Clean Energy Stats
Power capacity additions saw their highest year-on-year increase in over two decades last year — 45% to nearly 280 GW. As high capacity additions become the new norm, renewable energies are now 90% of the current power capacity expansion across the globe.
Solar power system development is breaking pre-pandemic records, and it’s estimated to reach 162 GW by 2022. At the same time, wind capacity additions have increased 90% globally. The market growth for both is nearly 50% higher than it was on average back in 2019.
Renewable Energy History in the US
Wood was the primary energy source in the U.S. until the mid-1800s, but a lot has changed since then. Fossil fuels like coal, petroleum and natural gas emerged as an alternative by the end of that century and continued to be the best bet for over a century.
However, the 1990s cast U.S. energy needs in a new light and led to the rise of renewable energy production and consumption. The use of biofuels, geothermal energy, solar energy and wind energy reached record highs during the COVID-19 pandemic in 2020.
Last year, electric power accounted for roughly 60% of the net U.S. renewable energy consumption. Moreover, up to 20% of total electricity generated in the U.S. came from sustainable sources.
Defining Clean Energy ETFs
Clean energy ETFs are exchange-traded funds that put your money in stocks in the alternative energy sector. Alternative energy includes:
- Solar energy
- Hydroelectric energy
- Wind energy
- Geothermal energy
Why Invest in Clean Energy ETFs?
When you invest in ETFs, you get access to the clean energy market without having to go through the hassle of picking stocks yourself. You can always look for those that fit your personal portfolio if you want to be a tad more selective with your clean energy investments.
Although investing in ETFs might not feel like you’re diversifying, the clean energy sector is pretty diverse by nature. The newfound attention renewable energies have seen in the past year and the intra-industry diversification could potentially give you some safety as you grow your portfolio and make it greener.
Best Clean ETFs in August 2021
|Name||Symbol||Current price||YTD return|
|Energy Select Sector SPDR Fund||XLE||$48.05||30.63%|
|John Hancock Multi-Factor Energy ETF||JHME||$18.55||29.76%|
|Alerian Energy Infrastructure ETF||ENFR||$18.61||38.84%|
|iShares U.S. Energy ETF||IYE||$25.95||31.03%|
|Fidelity MSCI Energy Index ETF||FENY||$13.03||32.22%|
|Vanguard Energy ETF||VDE||$66.87||32.71%|
|SPDR S&P Oil & Gas Exploration & Production ETF||XOP||$77.28||34.20%|
|Invesco DWA Energy Momentum ETF||PXI||$23.50||33.87%|
|First Trust Nasdaq Oil & Gas ETF||FTXN||$15.73||36.15%|
|iShares U.S. Oil & Gas Exploration & Production ETF||IEO||$49.96||38.75%|
Best Current Clean Energy Brokers
Clean energy ETFs are a cost-effective way for investment savvy people to diversify their portfolios without searching far and wide. This attractive characteristic has given them a surge in popularity in the past few years and made them a standard offering of online brokers.
It’s possible to trade ETFs like an individual stock, and many brokers offer them commission-free. However, it’s vital for investors to consider the broker’s criteria, fund selection and tools before handing over their hard-earned money.
Some of the most reputable online brokers for clean energy ETF investors today are:
Are Clean Energy ETFs a Smart Investment?
Buying clean energy ETFs is all the rage these days. It’s a more affordable and lower-risk alternative to other ways of investing your money in 2021 and provides investors the opportunity to explore the ever-growing green energy sector. The renewable power capacity additions landscape is still changing rapidly, so you should always compare your options and monitor the market’s evolution before you commit to purchasing any type of ETF.
Good To Know
Some ETFs offer US-only holdings, while others are international. The share prices for ETFs fluctuate throughout the day as they’re bought and sold.
Clean Energy ETFs FAQHere are the answers to some of the most frequently asked questions about clean energy ETFs.
- How many ETFs should you have?
- Depending on your existing portfolio, you could use between eight and 10 EFTs if you don't currently have other investments like individual stocks.
- What is the largest clean energy ETF nowadays?
- iShares Core S&P 500 ETF IVV is the largest clean energy ETF at $300.55 billion in assets under management.
- What type of green energy should you invest in?
- This depends on whether you have already invested in specific green energy types and what your existing portfolio looks like. Your options include wind, hydroelectric, solar and geothermal investments.
Rates are accurate as of Aug. 18, 2021.
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- IEA. "Renewable Energy Market Update 2021."
- The White House. 2021. "FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies."
- Bloomberg. 2021. "Wall Street Has Surrendered to the $500 Billion ETF Rush."