Clean Energy ETFs – ICLN vs. QCLN vs. PBW – Investing for future growth – An in-depth comparison.

by 036Gooddaysir036

Introduction:

This post will focus on breaking down the differences between 3 of the largest clean energy ETFs, QCLN, ICLN, and PBW. The focus will be exclusively on these ETFs and not single stocks. Now is an excellent time to invest in clean energy, According to several sources, renewables are set to represent ¾ of the $12T the world invests in new power technology through 2040. For the US alone almost $2 trillion is the investment needed to implement renewable energy targets by 2030.

NOTE: It would be wise to keep a long-term investing mindset. Investments that focus on particular segments of the market can see significant short-term fluctuations in price. Additionally, in the past 10 years, clean energy ETFs have had returns that range from low single-digit gains to low single-digit declines.

Alrighty let’s get into it.

ICLN – iShares Global Clean Energy ETF :

Between the 3, ICLN currently has the most assets under management at $2.05B and the lowest expense ratio at 0.46%, however, it is also the least diversified, having only 30 current holdings. This ETF tracks the S&P Global Clean Energy Index. ICLN holds a portfolio of ‘clean energy’ companies, such as biofuels, ethanol, geothermal, hydroelectric, solar and wind industries. Additionally it also holds companies that develop technology and equipment used in the process. It does not have exposure to the Electric Vehicle Market! Of these 3 it has the most Global Exposure.

Top 10 sectors (5 in this case since it doesn’t even have 10):

  • Renewable Energy Equipment & Services – 59.31%
  • Electric Utilities – 25.80%
  • Independent Power Producers – 9.28%
  • Multiline Utilities – 3.28%
  • Renewable Fuels – 2.32%

Top 10 holdings: SolarEdge Technologies, Inc. 7.50%, Plug Power Inc. 7.21%, Sunrun Inc. 7.16%, Enphase Energy, Inc. 6.97%, Xinyi Solar Holdings Ltd 6.24%, First Solar, Inc 4.88%, Vestas Wind Systems A/S 4.53%, Siemens Gamesa Renewable Energy, S.A. 4.50%, Contact Energy Limited3.48%, Boralex Inc. Class A 3.42%. (NOTE Total Top 10 Weighting – 55.89%)

QCLN – First Trust NASDAQ Clean Edge Green Energy ETF:

QCLN currently has $756 million assets under management with the middle expense ratio at 0.60%. Additionally, between these 3 ETFs, it is the second-most diversified with 43 current holdings. This ETF tracks the NASDAQ Clean Edge Green Energy Index, which, compared to the previous, includes a mix of U.S. and Canadian clean energy companies. For this ETF companies are from the following four sub-sectors: advanced materials (that enable clean-energy/reduce need for oil products), energy intelligence (smart grid), energy storage and conversion (hybrid batteries), or renewable electricity generation (solar, wind, geothermal, etc).

Top 10 sectors:

  • Renewable Energy Equipment & Services – 32.34%
  • Auto & Truck Manufacturers – 23.97%
  • Semiconductors – 13.18%
  • Electric Utilities – 7.40%
  • Electrical Components & Equipment – 6.97%
  • Commodity Chemicals – 5.97%
  • Independent Power Producers – 3.21%
  • Construction Supplies & Fixtures – 2.45%
  • Commercial REITs – 1.70%
  • Heavy Electrical Equipment – 0.84%
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Top 10 Holdings: NIO Inc. Sponsored ADR Class A 10.00%, SolarEdge Technologies, Inc. 7.03%, Enphase Energy, Inc. 6.53%, Tesla Inc 5.94%, Albemarle Corporation 5.06%, ON Semiconductor Corporation 4.21%, Brookfield Renewable Partners LP 4.08%, Cree, Inc. 3.96%, Universal Display Corporation 3.81%, First Solar, Inc. 3.75%. (NOTE: Total Top 10 Weighting – 54.37%)

PBW – Invesco WilderHill Clean Energy ETF:

PBW currently has $962 million assets under management with the highest expense ratio of 0.70%, however it is also the most diversified with 48 current holdings. PBW is more diverse than just industry pure-plays like wind, solar, and biofuels, it aims to include companies based on their perceived relevance to the renewable energy space as well. Additionally, it follows a tiered, equal-weighting structure and caps any holding to a tax of 4%.

Top 10 sectors:

  • Renewable Energy Equipment & Services – 44.46%
  • Auto & Truck Manufacturers – 13.70%
  • Semiconductors – 7.36%
  • Commodity Chemicals – 6.74%
  • Construction & Engineering – 4.47%
  • Industrial Machinery & Equipment – 3.97%
  • Electric Utilities – 3.40%
  • Heavy Electrical Equipment – 3.17%
  • Renewable Fuels – 2.76%
  • Agricultural Chemicals – 2.17%

Top 10 Holdings: (Remember 4% cap) JinkoSolar Holding Co., Ltd. Sponsored ADR 3.85%, NIO Inc. Sponsored ADR Class A 3.12%, Lithium Americas Corp. 3.06%, Daqo New Energy Corp. Sponsored ADR 3.02%, SunPower Corporation 2.93%, Livent Corporation 2.85%, Enphase Energy, Inc. 2.69%, SolarEdge Technologies, Inc. 2.68%, Kandi Technologies Group, Inc. 2.61%, Sociedad Quimica Y Minera De Chile S.A. Sponsored ADR Pfd Class B 2.49%.

Takeaway/Final Thoughts:

Clean energy has a very bright future but the industry is still emerging. For this reason, market risk and price volatility may be higher than the broader market, and ETFs may be more favorable compared to individual stocks.

For those looking for a Clean Energy ETF that has more Global Exposure and is more diversified than ICLN, I would recommend checking out PBD – Invesco Global Clean Energy ETF.

As always thankyou for reading. This is not all inclusive so please do your own research to supplement, and if anyone else has any other great Clean Energy ETFs that they may prefer please comment! Have a good day everyone!

Edit: Most sources would say to limit your cap your exposure to a market sector to 5%. This is, of course, up to personal preference, sector knowledge, and risk tolerance.

Edit 2: One User reccomended CNRG, it is similar to PBW with slightly different weighting and more expose to Renewable Energy Equipment and Services. Definitely worth a closer look and consideration!

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.