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, 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 exchange-traded funds is an excellent way to gain more exposure to the renewable energy industry.
What Are Clean Energy ETFs?
Clean energy ETFs put your money in stocks in the alternative energy sector. Alternative energy includes:
- Solar energy
- Hydroelectric energy
- Wind energy
- Geothermal energy
Best Clean ETFs in December 2021
|Name||Symbol||Current price||YTD return|
|Energy Select Sector SPDR Fund||XLE||$55.58||57.90%|
|John Hancock Multi-Factor Energy ETF||JHME||$22.34||62.39%|
|Alerian Energy Infrastructure ETF||ENFR||$19.39||46.22%|
|iShares U.S. Energy ETF||IYE||$30.53||60.66%|
|Fidelity MSCI Energy Index ETF||FENY||$15.22||61.46%|
|Vanguard Energy ETF||VDE||$78.00||62.11%|
|SPDR S&P Oil & Gas Exploration & Production ETF||XOP||$98.80||82.95%|
|Invesco DWA Energy Momentum ETF||PXI||$31.14||90.79%|
|First Trust Nasdaq Oil & Gas ETF||FTXN||$19.63||81.24%|
|iShares U.S. Oil & Gas Exploration & Production ETF||IEO||$61.23||83.96%|
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 ETFs 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 individual stocks, and many brokers offer them commission-free. However, it’s vital that you consider the broker’s criteria, fund selection and tools before handing over your hard-earned money.
Some of the most reputable online brokers for clean energy ETF investors today are:
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 alternatives 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.
Clean Energy Stats
Power capacity additions saw their highest year-on-year increase in over two decades last year — 45%, to nearly 280 gigawatts, according to the International Energy Agency. 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 gigawatts 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.
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, coupled with innate intra-industry diversification, could potentially give you some safety as you grow your portfolio and make it greener.
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 U.S.-only holdings, while others are international. The share prices for ETFs fluctuate throughout the day as they’re bought and sold.
Daria Uhlig contributed to the reporting for this article.
Data is accurate as of Dec. 7, 2021, and subject to change.