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Time for Clean Energy ETFs?

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Ownership of renewable energy stocks is extremely crowded, per the index provider MSCI. President Biden has expansionary plans for clean energy. He has a plan — a Clean Energy Revolution — to address the issue of climate emergency. He sees America as becoming a 100% clean energy economy by 2035 and having net zero emission by 2050.

If this is not enough, U.S. Treasury Secretary Janet Yellen recently said that she will back an effort by top U.S. regulators to evaluate the likely risk that climate change is causing to America’s financial system, as quoted on an apnews article.

Yellen says the regulatory review, which will be done by the Financial Stability Oversight Council, will scrutinize whether banks and other lending institutions are correctly assessing the risks to financial stability. The United States once again entered the Paris climate accord – adopted in 2016 – in the Biden era (read: 5 Most-Crowded Trades & Their Winning ETFs).

In any case, clean energy ha become one of the most-crowded trades in recent times. Investors appear to be bothered about the future of the environment and the effect it might have on their investing portfolio.

For example, since apprehension about the death of natural resources has urged global superpowers to boost clean energy and reduce carbon emissions, investors believe that stocks with higher ESG scores will eventually outperform.

Apart from the social standpoint, this investing practice has a valid reason for increased gains. As per the source, lesser focus on environmental issues by the companies may result in lawsuits, fines and damages. In most cases, it has been seen that sound corporate governance leads to greater corporate durability.

Between 2018 and 2020, total U.S.-domiciled sustainably invested assets under management, both institutional and retail, skyrocketed 42% to $17.1 trillion, per a CNBC article. Notably, BlackRock launched 93 new sustainable solutions in 2020, helping clients allot $39 billion to sustainable investment strategies, which drove a 41% increase in sustainable AUM from Dec 31, 2019.

Investors intend to double their allocations to sustainable products over the next five years, per BlackRock and 20% said that the pandemic has actually brought their sustainable investing allocations on the fast-track mode.

Here are a few clean energy ETFs that gives you exposure to the segment.

ETFs in Focus

iShares Global Clean Energy ETF (ICLN - Free Report) – Zacks Rank #2 (Buy)

The underlying S&P Global Clean Energy Index tracks the performance of approximately 30 of the most liquid and tradable global companies which represent the listed clean energy universe. The fund charges 46 bps in fees.

Invesco Global Clean Energy ETF (PBD - Free Report) – Zacks Rank #3 (Hold)

The underlying WilderHill New Energy Global Innovation Index is comprised of companies engaged in the business of the advancement of cleaner energy and conservation. It charges 75 bps in fees.

Invesco Solar ETF (TAN - Free Report) – Zacks Rank #3

The underlying MAC Global Solar Energy Index is comprised of companies in the solar energy industry. It charges 69 bps in fees.

ALPS Clean Energy ETF (ACES - Free Report) – Zacks Rank #3

This fund seeks to track the performance of an index comprising U.S. and Canada-based companies that primarily operate in the clean energy sector. It charges 55 bps in fees per year from investors.

SPDR S&P Kensho Clean Power ETF (CNRG)

This ETF offers exposure to companies whose products and services are driving innovation in the clean energy sector, which includes the areas of solar, wind, geothermal and hydroelectric power. It charges 45 bps in fees.