Though the broader market has gained from a Fed and trade-induced rally this year, one segment that was thought to face some pressure was alternative energy ETFs or green ETFs. This is because President Trump is apparently against promoting green energy. In his latest budget blueprint for 2020, he substantially reduced new spending on federal programs for advancing clean energy.
Keeping his campaign promise, Trump had pulled America out of the landmark Paris climate change agreement, which was expected to bring the fossil fuel era to an end (read: Trump Exits Paris Climate Deal: ETFs to Gain & Lose).
And now, the President plans to cut funding for the Department of Energy's Office of Energy Efficiency and Renewable Energy (EERE) by 87% — from $2.3 billion last year to $343 million in new spending next year.
But several green or clean energy ETFs have delivered upbeat gains so far this year. The top performer in the green space was Invesco Solar ETF (TAN - Free Report) (up 29.9%), which beat the S&P 500’s rise of 12%. For obvious reasons, green energy funds are worth a look, especially on the occasion of St. Patrick's Day, a day associated with the color green.
Inside the Rise of Green Energy
Clean energy jobs are thriving in the United States. Two sectors in particular — energy storage and clean vehicles — witnessed a respective 14% and 15% increase in jobs from the last year, “driven by growing consumer electric vehicle adoption, state expansions of charging infrastructure, falling battery prices and increased solar-storage installations.”
Overall, clean energy jobs expanded 3.6% in 2018, with wind employment flourishing. San Francisco municipal utility plans to focus on 100% renewable energy, which would necessitate more constructionof solar and wind facilities.
There is news that some states, including California, are using solar subsidies to boost solar power adoption. California, in fact, mandated all new homes built starting in 2020 to have solar power (read: Top Performing ETF Areas of February).
Against the global backdrop, China is a major player building a green environment. In 2018, China invested around $100 billion. The country is gearing up to launch its ‘artificial sun’ nuclear reactor for the supply of unlimited clean energy.
Almost half of the European Union’s (EU) 28 member states have already reached or are about to touch their 2020 renewable energy targets. However, the rate of adoption is cooling of late. Whatever be the case, green ETFs are on the rise this year. Below we highlight some of the top performers.
TAN in Focus – Up 29.9%
The underlying MAC Global Solar Energy Index comprises companies in the solar energy industry. It charges 70 bps in fees.
Invesco WilderHill Clean Energy ETF (PBW - Free Report) — Up 28.7%
The underlying WilderHill Clean Energy Index is composed of stocks of companies that are publicly traded in the United States and are engaged in the business of advancement of cleaner energy and conservation. It charges 70 bps in fees (read: Trump Proposes 2020 Budget: ETFs to Top & Flop).
SPDR Kensho Clean Power ETF — Up 20.5%
The underlying Kensho Clean Power Index comprises U.S. listed equity securities of companies domiciled across developed and emerging markets worldwide which are included in the Clean Power sector. The fund charges 45 bps in fees.
ALPS Clean Energy ETF (ACES - Free Report) — Up 20.1%
The underlying CIBC Atlas Clean Energy Index utilizes a rules-based methodology which is designed to provide exposure to a diverse set of U.S. and Canadian companies involved in the clean energy sector including renewables and clean technology. The fund charges 65 bps in fees.
iShares Global Clean Energy ETF (ICLN - Free Report) — Up 19.0%
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 47 bps in fees.
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