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Fed Likely to Cut Rate Today: 5 Clean Energy ETFs in Focus
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The U.S. economy has been on edge recently, with the stock market being highly volatile due to the nation’s aggressive tariff regime, a weakening job market, sticky inflation and soaring fiscal deficits. Amid all these concerns, investors anxiously await the Federal Reserve's expected decision to lower interest rates by 0.25% by the end of today’s session, as hinted by Fed Chair Jerome Powell in his Aug. 22 speech.
This policy shift, seen as a necessary measure to stimulate economic activity and ease pressure on consumers' purchasing power, should also boost capital-intensive industries like clean energy.
Why Lower Rates Matter for Clean Energy?
The clean energy sector is fundamentally capital-intensive. Building solar farms, wind turbines, battery storage facilities, and other critical infrastructure requires massive upfront investment. Historically, this has made clean energy companies highly sensitive to interest rates.
Thus, a rate cut typically benefits renewable energy companies through reduced financing costs for their often debt-funded projects, making solar farms, wind installations, and other clean energy initiatives more economically viable.
This ripple effect can directly boost the valuations of clean energy companies and, by extension, the clean energy ETFs that hold them.
5 U.S.-Focused Clean Energy ETFs Positioned to Benefit
The following clean energy ETFs have already been rallying since Fed Chair Powell’s Aug. 22 speech and can be expected to soar much higher, thanks to their dominant exposure in U.S.-based companies.
As the largest clean energy ETF with approximately $1.60 billion in assets under management, ICLN offers broad exposure to leading companies in solar, wind, and other renewable sectors worldwide. While it's global in scope, it maintains significant U.S. holdings (28.95%). Its top holding is U.S.-based solar module manufacturer, First Solar (FSLR). FSLR takes about 9.20% weight of the fund's weight. Overall, the fund holds about 100 stocks in its portfolio.
ICLN has risen 1.5% since Aug. 22. The fund has an expense ratio of 0.39%.
First Trust Nasdaq Clean Edge Green Energy ETF ((QCLN - Free Report) )
It focuses on U.S.-listed companies involved in renewable electricity generation, energy storage, electric vehicles, and those involved in emerging clean energy technologies. Its total net asset is valued at approximately $470.2 million. The 47-stock fund’s top holding is also First Solar.
QCLN has gained 4.3% since Aug. 22. The fund has an expense ratio of 0.56%.
ACES consists of companies primarily located in North America that are focused on renewable energy and other clean technology themes. The fund holds about 35 stocks in total. Its total net asset is valued at approximately $98.4 million. Geographically, it maintains the largest holding in the United States (86.5%), with California-based Tesla (TSLA) taking the top spot in the portfolio with about 6.22% weight, followed by Sunrun (5.87% weight).
ACES has risen 1.7% since Aug. 22. The fund has an expense ratio of 0.55%.
Invesco WilderHill Clean Energy ETF ((PBW - Free Report) )
This 64-stock ETF tracks a broad range of U.S. clean energy companies, offering exposure to a diversified portfolio of renewable energy stocks. The fund invests at least 90% of its total assets in stocks publicly traded in the United States. Its total net asset is valued at approximately $401.7 million, and its top holding is California-based Bloom Energy (BE). However, no stock accounts for more than 3.63% of the fund.
PBW has rallied 3.8% since Aug. 22. The fund has a total expense ratio of 0.65%.
This 42-stock ETF consists of companies focused on renewable energy sources, including solar, wind, geothermal and hydroelectric power, in developed as well as emerging markets. Its asset under management is approximately $159.8 million. Geographically, it maintains the largest holding in the United States (80.9%), with Bloom Energy in its top holdings (6.63% weight).
CNRG has risen 6.6% since Aug. 22. The fund has an expense ratio of 0.45%.
Bottom Line
The Federal Reserve's expected rate cut today could mark the beginning of a more favorable financing environment for clean energy companies, potentially boosting the performance of ETFs highlighted above. However, investors should remain mindful of the industry’s volatility and the various political, regulatory, and economic factors that continue to influence clean energy investments.
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Fed Likely to Cut Rate Today: 5 Clean Energy ETFs in Focus
The U.S. economy has been on edge recently, with the stock market being highly volatile due to the nation’s aggressive tariff regime, a weakening job market, sticky inflation and soaring fiscal deficits. Amid all these concerns, investors anxiously await the Federal Reserve's expected decision to lower interest rates by 0.25% by the end of today’s session, as hinted by Fed Chair Jerome Powell in his Aug. 22 speech.
This policy shift, seen as a necessary measure to stimulate economic activity and ease pressure on consumers' purchasing power, should also boost capital-intensive industries like clean energy.
Why Lower Rates Matter for Clean Energy?
The clean energy sector is fundamentally capital-intensive. Building solar farms, wind turbines, battery storage facilities, and other critical infrastructure requires massive upfront investment. Historically, this has made clean energy companies highly sensitive to interest rates.
Thus, a rate cut typically benefits renewable energy companies through reduced financing costs for their often debt-funded projects, making solar farms, wind installations, and other clean energy initiatives more economically viable.
This ripple effect can directly boost the valuations of clean energy companies and, by extension, the clean energy ETFs that hold them.
5 U.S.-Focused Clean Energy ETFs Positioned to Benefit
The following clean energy ETFs have already been rallying since Fed Chair Powell’s Aug. 22 speech and can be expected to soar much higher, thanks to their dominant exposure in U.S.-based companies.
iShares Global Clean Energy ETF ((ICLN - Free Report) )
As the largest clean energy ETF with approximately $1.60 billion in assets under management, ICLN offers broad exposure to leading companies in solar, wind, and other renewable sectors worldwide. While it's global in scope, it maintains significant U.S. holdings (28.95%). Its top holding is U.S.-based solar module manufacturer, First Solar (FSLR). FSLR takes about 9.20% weight of the fund's weight. Overall, the fund holds about 100 stocks in its portfolio.
ICLN has risen 1.5% since Aug. 22. The fund has an expense ratio of 0.39%.
First Trust Nasdaq Clean Edge Green Energy ETF ((QCLN - Free Report) )
It focuses on U.S.-listed companies involved in renewable electricity generation, energy storage, electric vehicles, and those involved in emerging clean energy technologies. Its total net asset is valued at approximately $470.2 million. The 47-stock fund’s top holding is also First Solar.
QCLN has gained 4.3% since Aug. 22. The fund has an expense ratio of 0.56%.
ALPS Clean Energy ETF ((ACES - Free Report) )
ACES consists of companies primarily located in North America that are focused on renewable energy and other clean technology themes. The fund holds about 35 stocks in total. Its total net asset is valued at approximately $98.4 million. Geographically, it maintains the largest holding in the United States (86.5%), with California-based Tesla (TSLA) taking the top spot in the portfolio with about 6.22% weight, followed by Sunrun (5.87% weight).
ACES has risen 1.7% since Aug. 22. The fund has an expense ratio of 0.55%.
Invesco WilderHill Clean Energy ETF ((PBW - Free Report) )
This 64-stock ETF tracks a broad range of U.S. clean energy companies, offering exposure to a diversified portfolio of renewable energy stocks. The fund invests at least 90% of its total assets in stocks publicly traded in the United States. Its total net asset is valued at approximately $401.7 million, and its top holding is California-based Bloom Energy (BE). However, no stock accounts for more than 3.63% of the fund.
PBW has rallied 3.8% since Aug. 22. The fund has a total expense ratio of 0.65%.
SPDR S&P Kensho Clean Power ETF ((CNRG - Free Report) )
This 42-stock ETF consists of companies focused on renewable energy sources, including solar, wind, geothermal and hydroelectric power, in developed as well as emerging markets. Its asset under management is approximately $159.8 million. Geographically, it maintains the largest holding in the United States (80.9%), with Bloom Energy in its top holdings (6.63% weight).
CNRG has risen 6.6% since Aug. 22. The fund has an expense ratio of 0.45%.
Bottom Line
The Federal Reserve's expected rate cut today could mark the beginning of a more favorable financing environment for clean energy companies, potentially boosting the performance of ETFs highlighted above. However, investors should remain mindful of the industry’s volatility and the various political, regulatory, and economic factors that continue to influence clean energy investments.