20 Best Clean Energy Mutual Funds

Which are the best clean energy mutual funds to invest in right now? And, is the clean energy sector even worth your money? Read on to find out. 

The renewable energy sector is booming as governments, companies, and individuals heavily invest in alternative energy. These include solar, geothermal, water, and the wind, among other renewable resources. 

The  International Energy Agency (IEA) indicates a more than 60% rise in global renewable energy capacity by 2026. Therefore, investors are shifting their focus to the alternative energy industry because of the high potential to generate long-term revenue growth and profits.

The clean energy mutual funds expose investors to a broad range of professionally managed renewable energy companies. Such include companies in geothermal, hydroelectric energy production, wind, hydrogen, and solar. Several of these green energy companies also trade in energy funds.

Read on to learn more about the best energy companies to invest in. 

But first,

What Constitutes a Clean Energy Mutual Funds?

A clean energy mutual fund pools funds from its stockholders and invests the money in companies that generate or advocate for green energy such as geothermal, solar, or wind. These sustainable energy companies trade in clean energy ETFs.

The alternative energy generates power without harming the environment and minimizing climate change and fossil fuel use. Their aim is to positively impact the environment and safeguard the future of natural resources. 

To qualify as a renewable energy mutual funds, the EFTs should :

• Focus on sustainable energy solutions and being environmentally friendly and socially responsible.
• Have reasonable costs to bring in exposure to the energy sector. Have adequate liquidity

 1. iShares Global Clean Energy ETF (ICLN)

This ETF is one of the most significant green energy mutual funds with an asset base of almost $6 billion. It has a low expense ratio of 0.46% and rates highly in the MSCI ESG score, which indicates that ICLN is socially and environmentally responsible.

With an impressive portfolio of 112 different stocks, the fund’s investment objective is to become carbon neutral by 2025. The ICLN invests in renewable power plants, technology, and industrial companies responsible for renewable energy production.

The mutual funds also invest in solar panel manufacturers, thus offering investors more diversification than investing only in energy production.

Pros of iShares Global Clean Energy ETF

• The mutual fund invests in low-volatility utilities.
• ICLN has a low expense ratio 
• Diversified portfolio
• High net assets

Cons of iShares Global Clean Energy ETF

• ICLN risks significant index rebalancing from collecting too many funds from a few small companies. The pulling out of these companies will cause a considerable problem.

See Related: Best Climate Change Mutual Funds

2. Guinness Atkinson Alternative Energy Fund (GAAEX)

The Guinness Atkinson, Alternative Energy Fund, aims for a sustained capital appreciation by investing not less than 80% of its net assets in equity securities of renewable energy companies, in and out of the United States.

The fund manager invests in GAAEX’s utilities, technology, and industrial companies’ securities assets. It invests in sustainable companies with a market capitalization of at least $500 million.

Generally, the Guinness Atkinson Alternative Energy Fund mainly invests in technology stocks, dividing between the U.S and foreign stocks. However, the U.S has a more extensive portfolio share. 

Pros of Guinness Atkinson Alternative Energy Fund 

• Less risky compared to other ETFs
• No distribution fees

Cons of Guinness Atkinson Alternative Energy Fund 

• Low net assets
• A high expense ratio of 1.98%

See Related: How Much is a Wind Turbine? Here’s What to Know

3. Invesco Solar ETF (TAN)

The Invesco Solar ETF holds almost $3 billion in assets in management, making it the second-largest clean energy ETF. The Invesco Solar ETF has an expense ratio of 0.69%, mostly on solar energy stocks. TAN ETF has high scores in ESG and MSCI, making it socially and environmentally responsible.

TAN ETF mainly focuses on the solar energy sector, including solar panel manufacturers, solar energy systems, and electrical components. The Invesco Solar ETF is the best clean energy mutual fund for solar energy investment.

Due to the fund specializing only in solar energy, it isn’t as diversified as other ETFs.

Pros of Invesco Solar ETF (TAN)

• Low expense ratio
• High ESG scores
• Best ETF for solar and wind energy

Cons of Invesco Solar ETF (TAN)

• Low diversification compared to other mutual funds.

See Related: Forum Energy Technologies, Inc. ESG Profile (FET): Is It Sustainable?

4. First Trust NASDAQ Clean Edge Energy Index Fund

This ETF seeks to track the performance of the NASDAQ Clean Edge Green Energy Index by investing at least 90% of its net assets in clean energy companies listed on major U.S. stock exchanges. The index tracks companies involved in manufacturing, developing, distributing, and installing clean energy technologies.

As part of its focus, the First Trust NASDAQ Clean Edge Energy Index Fund holds companies engaged in producing, distributing, and installing clean energy technologies. This includes companies in

• Solar power, electric vehicles (EVs)
• Wind power
• Fuel cells
• Battery storage

The fund has a broader portfolio than energy-focused ETFs by focusing on energy producers and the clean energy industry.

A $1,000 investment in The First Trust NASDAQ Clean Edge Green Energy ETF charges a 0.06% expense ratio. And, the fund has around 2.2 billion dollars in assets under management.

There are 53 companies in the fund’s portfolio. Among the fund’s most attractive features is its diversified portfolio that invests in companies across various green energy sectors. MSCI has graded First Trust NASDAQ Clean Edge Green Energy ETF “A” on environmental, social, and governance factors.

Pros of The First Trust NASDAQ Clean Edge Green Energy ETF

• Low expense ratio
• The ETF has a broader portfolio.
• High net assets

Cons of The First Trust NASDAQ Clean Edge Green Energy ETF

• NASDAQ has a high risk of reconstitution and rebalancing

See Related: Best Electric Vehicle Mutual Funds

5. Invesco WilderHill Clean Energy ETF (PBW)

With its equal-weight strategy, Invesco WilderHill Clean Energy ETF invests a similar amount across a diversified collection of clean energy and conservation companies. The ETF manages close to $2 billion in assets, allowing investors to invest in a wide range of clean energy companies. Companies involved with wind energy, solar energy, EVs, and geothermal energy are among its holdings.

U.S. companies make up the majority of Invesco WilderHill Clean Energy ETF holdings, but it also offers some sector diversification. The expense ratio is reasonable at 0.61%.

Although the MSCI has not assigned an ESG rating to the Invesco WilderHill Clean Energy ETF, many of its holdings are focused on developing, producing, or reducing carbon emissions. This gives them a strong environmental focus.

Pros of Invesco WilderHill Clean Energy ETF

• Reasonable expense ratio 
• The ETF has a broad portfolio
• High net assets

Cons of Invesco WilderHill Clean Energy ETF

• Subjected to market volatility

See Related: Southwestern Energy Company ESG Profile (SWN): Is It Sustainable?

6. First Trust Global Wind Energy ETF (FAN)

FAN’s focus on wind energy makes it ideal for investors interested in the global expansion of the wind energy industry. In addition to its wind energy exposure, the First Trust Global Wind Energy ETF provides investors with exposure to diversified wind energy companies that complement its objectives of wind conservation.

Typically, the First Trust Global Wind Energy ETF will invest a minimum of 90% of its net assets in the stocks and depositary receipts that make up the index, either as part of a long-term strategy or a shorter-term move. The most notable attribute of FAN is the composition of its underlying index, which consists of both pure-play wind power companies and companies with more generalized operations that include wind power.

ISE Clean Edge Global Wind Energy TM Index measures the price and yield of the First Trust Global Wind Energy ETF. And, an investor interested in tracking wind energy companies worldwide can use the index as a benchmark.

Security issues must be backed by a company actively involved in some aspect of the wind energy industry to qualify for inclusion in the index.

According to MSCI, First Trust Global Wind Energy ETF has a AA rating on ESG factors. With an expense ratio of 0.67%, the ETF is reasonably priced.

Pros of the First Trust Global Wind Energy ETF

• Has a tremendous long term potential
• reasonable expense ratio

Cons of the First Trust Global Wind Energy ETF

• Significant volatility in the short term
• The fund is non-diversified

See Related: Overharvesting & Overexploitation of Natural Resources: The Effects To Know

7. Invesco MSCI Sustainable Future ETF (ERTH)

While clean energy companies make up a large portion of the Invesco MSCI Sustainable Future ETF’s portfolio, the fund focuses on a broad portfolio. A clean energy investment offered by ERTH allows investors to invest without committing their entire funds to one sector. The diversification plan of the fund involves diversifying its portfolio into sustainable businesses.

The fund’s assets under management total $470.88 million, and its expense ratio is 0.68%. This fund generally invests not less than 90% of its total assets in securities that make up the Index. Those companies included in the index focus on offering products or services that use global resources more efficiently to contribute to a more environmentally sustainable economy.

Six environmental impact themes are integrated into the Index including;

• Renewable energy
• Green building
• Preventing pollution from the environment
• Energy efficiency
• Ensuring sustainable agriculture

Moreover, this allows the fund to invest in businesses poised to grow as sustainable living gains popularity.

Pros of the Invesco MSCI Sustainable Future ETF

• Highly diversified
• Low expense ratio
• Low volatility due to quarterly rebalancing

Cons of the Invesco MSCI Sustainable Future ETF

• You can also incur other costs such as transaction fees by rebalancing, which does not increase long-term investment returns.

See related: EnergySage Review: Is It Legit to Use?

8. VanEck Vectors Low Carbon Energy ETF

A minimum of 80% of the VanEck Vectors Low Carbon Energy ETF’s assets usually go towards stocks of low-carbon energy companies. Investments in MVIS Global Low Carbon Energy Index seek to mimic the index’s performance before fees and expenses with as much accuracy as possible.

Companies involved in low-carbon energy may be small and medium-sized companies and foreign companies. Generally, low-carbon energy companies produce renewable energy, manufacture electric vehicles, and use alternative fuels and associated technologies.

TheVanEck Vectors Low Carbon Energy ETF seeks long-term capital appreciation. The Fund attempts to maximize actual returns while minimizing risks associated with sustained market declines to maximize long-term total returns. 

Investments in the fund typically consist of exchange-traded products providing exposure to inflation-fighting tangible assets, such as infrastructure, commodities, financial support, natural resource equities; REITs, MLPs, income assets, bitcoin, and gold.

With an expense ratio of 0.62%, this fund is non-diversified.

Pros of the VanEck Vectors Low Carbon Energy ETF

• Potential growth
• Reasonable expense ratio

Cons of the VanEck Vectors Low Carbon Energy ETF

• Risk of inflation

9. Global X Renewable Energy Producers ETF (RNRG)

Global X Renewable Energy Producers ETF invests exclusively in companies that generate energy from renewable sources such as geothermal, wind, hydroelectric, and solar. The fund currently manages $120.1 million, an indicator that it still has great growth potential.

Approximately 80% of a fund’s assets are invested in securities that align to the price and performance of the Indxx Renewable Energy Producers Index, before any fees or expenses. It carries an AAA MSCI ESG Fund Rating and is an excellent option for investors who wish to only invest in clean energy. Also, it has a 0.65% expense ratio.

Pros of the Global X Renewable Energy Producers ETF

• Potential for high growth
• Has a high ESG rating
• Reasonable expense ratio

Cons of The Global X Renewable Energy Producers ETF

• Don’t enjoy tax advantages 

10. Shelton Green Alpha Fund (NEXTX)

Shelton Green Alpha Fund invests in stocks in the green economy to achieve long-term capital appreciation. The fund’s investment sub-advisor, Green Alpha Advisors, selects stocks for the fund. Investors at Green Alpha look for reasonably valued companies with above-average growth potential.

Shelton Green Alpha Fund invests at least 80% of its total assets in a regular market, mainly in American Depository Receipts (ADRs) and common stocks of companies chosen by Green Alpha Advisors. These manage risks and maximize environmental opportunities promising growth potential and are reasonably valued.

However, it’s important to note that Growth stocks can perform differently from the market and can be more volatile than other types of stocks.

Shelton Green Alpha Fund has an expense ratio of 1.16 percent.

Pros of Shelton Green Alpha Fund

• Reasonable fees
• High potential for growth

Cons of Shelton Green Alpha Fund

• High risk
• High expense ratio

11. New Alternatives Fund Class A (NALFX)

New Alternatives Fund Class A invests in stocks of companies that manufacture products and have environmentally friendly facilities, and do not rely on fossil fuels. The Fund aims to generate long-term capital appreciation by investing in common stocks. Particular interest in Alternative Energy drives investments in companies of all sizes and across various industries. New Alternatives Fund Class A is a Socially Responsible Fund.

In addition to long-term capital growth, the secondary goal is receiving income. To accomplish its investment objectives, the fund invests in equity securities. The fund mainly invests in common stocks as equity securities, and the funds may also invest in publicly-traded master limited partnerships (MLPs), real estate investment trusts (REITs), and American Depository Receipts (ADRs).

The fund’s focus is renewable energy. Over 60% of its holdings are foreign companies, with the rest based in the United States. The fund combines value and growth stocks and invests primarily in midcap companies.

Pros of New Alternatives Fund Class A

• Fees are Below Average compared to funds in the same category
• A reasonable expense ratio of 0.85%

Cons of New Alternatives Fund Class A

• High risk

See related: 15 Best Paying Jobs in Energy to Pursue

12. SPDR S&P Kensho Clean Power ETF (CNRG)

The SPDR S&P Kensho Clean Power ETF seeks a return on investment that, prior fees and expenses, reflects the S&P Kensho Clean Power Index total return performance. In normal market conditions, the fund generally invests nearly all of its assets, but at least 80%, in solar, hydroelectric, geothermal, and wind companies securities.

 A primary objective of the fund is to identify companies whose products and services are driving innovation in the clean energy sector. In addition to equity securities, the fund will often invest in cash and cash equivalents, and money market instruments, including repurchase agreements and money market funds. The CNRG is non-diversified

The SPDR S&P Kensho Clean Power ETF offers a way to pursue long-term growth opportunities through investment in a portfolio of companies engaging in the transition to less-polluting power sources.

Pros of SPDR S&P Kensho Clean Power ETF

• High growth potential
• High ESG score

Cons of SPDR S&P Kensho Clean Power ETF

• The semi-annual rebalancing of the ETF may incur additional costs.

13. Direxion Daily Global Clean Energy Bull 2x Shares (KLNE)

This is a unique clean energy ETF. In that, it seeks a 200% performance on daily investments, before expenses and fees, for the Energy Select Sector Index. This index, usually an S&P 500 sub-index, is rebalanced every quarter.

The KLNE is very different from most others because it involves daily leveraged investments. Consequently, the Fund may provide greater risk than alternatives that don’t use leverage. S&P Global Clean Energy Index Fund seeks to increase the Index’s daily performance.

The index’s performance is based on companies whose financial health is directly related to the global clean energy sector.

Direxion Daily Global Clean Energy Bull 2x Shares invests at least 80% of its net assets into financial instruments, including;

• Index securities, 
• Swap agreements, 
• Exchange-traded funds, 
• Any other financial instruments providing daily leverage to the index or index-tracking ETFs.

It is non-diversified.

Pros of the Direxion Daily Global Clean Energy Bull 2x Shares

• Quick returns on your investment

Cons of the Direxion Daily Global Clean Energy Bull 2x Shares

• Highly risky

14. ALPS Clean Energy ETF

The ALPS Clean Energy ETFA invests a minimum of 80% of the fund’s net assets in securities related to the underlying index. It invests in companies that support a more sustainable energy future, such as clean technologies—renewable energy sources and any emerging clean energy technology.

CIBC National Trust Company, the index provider, developed the underlying index (the “index provider”), designed to help investors gain exposure to a diversified set of U.S. and Canadian companies that focus on the clean energy sector. The fund is non-diversified.

Pros of ALPS Clean Energy ETFA 

• High ESG rating
• Highly diversified

Cons of ALPS Clean Energy ETFA 

• Rebalancing the ETF may incur additional costs.

15. Invesco Clean Global Energy

Invesco Clean Global Energy uses WilderHill’s New Energy Global Innovation Index. The fund aims to track the investment performance of the WilderHill New Energy Global Innovation Index net of fees and expenses.

Generally, the fund will invest not less than 90% of its assets in securities that make up the Index, as well as global depositary receipts (GDRs) and American Depository Receipts (ADRs) that constitute the Index.

The Index includes companies that specialize in advancing clean energy and conservation. 

Pros of Invesco Clean Energy ETF

• Reasonable expense ratio 
• The ETF has a broad portfolio
• High net assets

Cons of Invesco Clean Energy ETF

• Subjected to market volatility

16. BMO Clean Energy ETF Fund

BMO Clean Energy Index ETF (ZCLN) seeks to match, as closely as possible, the returns of the S&P Global Clean Energy Index before costs. It invests mainly in clean energy companies. 

The fund may invest up to 100% of the fund’s assets in securities of BMO Clean Energy Index ETF. Additionally, the fund holds the index’s component securities at the same percentage as it appears in the index.

Pros of BMO Clean Energy Index ETF

• High growth potential

Cons of BMO Clean Energy Index ETF

• Highly risk

17. TrueShares ESG Active Opportunities ETF

TrueShares ESG Active Opportunities ETF seeks total returns through active management of a portfolio of big companies in the US with appealing investment profiles. It evaluates these companies based on specific proprietary social, environmental, and Governance metrics, focusing more on carbon footprints. 

Typically, TrueShares ESG Active Opportunities ETF invests a minimum of 80% of its assets into shares of ESG companies. The funds invest in securities of many industries, not investing more than 25% of their assets in any one sector.

Pros of TrueShares ESG Active Opportunities ETF

• The funds are diversified
• High ESG scores

See Related: Is Nuclear Energy Clean? Here’s What to Know

18. KraneShares Electric Vehicle and Future Mobility ETF

When it comes to alternative energy mutual funds, KARS offers another great option. Using Bloomberg Electric Vehicles Index as its benchmark, KARS give investors exposure to some of the world’s biggest producers of electric vehicles and their components. 

In fact, KARS also gives investors access to companies leading in the development of vehicle connectivity. This includes intelligent mobility and the Internet of vehicles. So, if you believe in the future of sustainable transportation, KARS is a fund worth considering.

Companies included in the index engage in:

• Electric lithium-ion/lead-acid batteries 
• Vehicles 
• Shared mobility 
• Hydrogen fuel cell manufacturing 
• Autonomous driving 
• Electric infrastructure businesses

This index measures the equity market performance of companies producing vehicles or components for electric cars. It also focuses on companies undertaking other initiatives that may influence the future of mobility.

Pros of KraneShares Electric Vehicle and Future Mobility ETF

• High growth potential
• Exposure to bigger markets

Cons of KraneShares Electric Vehicle and Future Mobility ETF

• Relatively low ESG score
• Susceptible to high risks

19. Lyxor MSCI New Energy Esg Filtered (DR)

The fund is benchmarked against an index that reflects the performance of stocks whose activities are linked to developing products and services in energy efficiency, alternative energy, smart grid technologies, and batteries. 

Also, ESG is incorporated into the index in the form of a best-in-class approach so that companies with a poor ESG score are excluded from the index. Controversial companies, companies with severe ESG issues, or companies that violate the UN Global Compact are not included.

Lyxor MSCI New Energy Esg Filtered is an exchange-listed investment that provides transparent, low-cost, and liquid exposure to the benchmark index.

Pros of Lyxor Msci New Energy Esg Filtered

• A low expense ratio of 0.60%
• Distribute dividends bi-annually

Cons of Lyxor Msci New Energy Esg Filtered

• High-risk ETF

20. HANetf S&P Global Clean Energy Select HANzero UCITS ETF

The Fund seeks to monitor the price and yield results, net of fees and expenses, of the S&P Global Clean Energy Select Index (the Index).

The Index follows a published, rules-based approach and aims to rate the performance of a global investment portfolio of publicly listed companies engaging in clean energy.

What are renewable energy mutual funds?

Mutual funds that invest in renewable energy focus on companies that generate or distribute energy from renewable sources such as solar, wind, hydro, and geothermal power. These funds may also invest in companies manufacturing and distributing renewable energy products and technologies.

Investing in renewable energy mutual funds can provide investors with exposure to the growing renewable energy sector while also promoting environmentally sustainable investments.

The Right Green Energy Mutual Funds for You

These green energy investment funds allow you to invest in clean energy at different levels. Some alternative energy funds focus on different types of renewable energy, while others cover a broader range of clean energy investments. It allows you to identify trends in green energy, making it less likely to pick a stock that will underperform.

Before investing in clean energy EFTs, you should check the fund’s past performance, and with proper financial planning, you can choose the best fund that fits your portfolio and help you achieve your investment goals.  Choose a green energy EFT with high growth potential and is environmentally and socially responsible.

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