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Max Manturov

Max Manturov

Head of investment research regulated by CySec 03.05.2021

Green Investments: Which Renewable ETFs Do I Add To My Portfolio?

There has been a movement toward "green energy" in recent years, with governments all over the world supporting similar programs. According to Grand View Research, the amount of renewable energy output will hit 12.6 TWh by 2027, up from 7.3 TWh in 2020. At the same time, the CAGR (compound annual growth rate) will be 7.9%.

The election of Joe Biden as President of the United States provided yet another boost to the economy. His strategy is geared toward promoting environmental and renewable energy initiatives. Following his inauguration, Biden made one of his first moves: the US joining the Paris Climate Agreement. An executive order was signed a few days later to double the capacity of the country's offshore wind farms by 2030.

In light of this, renewable energy projects could prove to be very promising and, in the medium term, an excellent investment option. Our analysts have compiled a list optimally structured ETFs, that include stocks from renewable energy companies.

1. iShares Global Clean Energy ETF

Ticker: ICLN.US

The fund allows members to invest in the S&P Global Clean Energy Index, which includes stocks of companies involved in the development of renewable energy. Simultaneously, ETF diversification is flawlessly implemented: by industry, company size, and region, lowering the degree of risk associated with investing in this asset.

If an investor is enthusiastic about renewable energy's potential prospects, purchasing this fund is a good way to invest in the sector: the ICLN ETF comprises companies from different subsectors. Wind energy, solar energy, and other alternative energy sources are among them. iShares Global Clean Energy is now the biggest fund in terms of assets under management (AUM), making it more liquid and appealing to investors.

Key facts:

  • Assets under management, AUM - $ 5.94 billion
  • Dividend yield - 0.39%
  • Expense Ratio - 0.46%
  • Number of names of shares in ETF - 83

Companies with the largest ETF allocations:

  • Vestas Wind Systems A / S - 8.29%.
  • Orsted - 6.39%.
  • Enphase Energy, Inc. - 5.78%.
  • Iberdrola SA (4.37%), Xcel Energy, Inc. - 4.2%.

The largest share of allocation by country:

  • USA - 33.9%.
  • Denmark - 14.7%.
  • Spain - 8.6%.
  • The largest share of allocation by sector - Utilities (55.3%)
  • Portfolio average P / E Ratio - 48.8x
  • ETF Return YTD - (-13.1%)

2. Invesco Solar ETF

Ticker: TAN.US

Invesco Solar focuses on the subsector of solar energy generation and distribution, which accounts for just a portion of the renewable energy sector. The ETF tracks the MAC Global Solar Energy Index's efficiency. Invesco Solar, like other highly specialized ETFs targeting various subsectors, has just 49 unique titles, from both domestic and foreign firms. It's worth noting that only three specific names make up a quarter of this ETF's properties. It is, however, an excellent asset for targeted solar energy investment.

Key facts:

  • Assets under management, AUM - $ 3.32 billion
  • Dividend yield - 0.10%
  • Expense Ratio - 0.69%
  • Number of names of shares in ETF - 49

Companies with the largest ETF allocations:

  • Enphase Energy, Inc. - 10.91%;
  • SolarEdge Technologies, Inc. - 9.85%;
  • Sunrun, Inc. - 6.87%;
  • First Solar, Inc. - 6.39%;
  • Xinyi Solar Holdings, Ltd. - 5.82%.

The largest share of allocation by country:

  • USA - 40.23%;
  • China - 16.1%;
  • Israel - 12.5%.

The largest share of allocation by sector:

  • Electronic Technologies - 30.2%;
  • Utilities - 28.2%;
  • Producer Manufacturing - 20.6%.
  • Average P / E Ratio for the portfolio - 100.4x
  • ETF Return YTD - (-11.6%)

3. First Trust NASDAQ Clean Edge Green Energy Index Fund

Ticker: QCLN.US

The QCLN from First Trust is another interesting ETF in the alternative energy market. The fund tracks efficiency of the NASDAQ Clean Edge Green Energy Index. The unique feature is that it includes stock in companies that manufacture and distribute "green" energy as well as biofuels, advanced batteries, electric vehicles, and other technologies. This ETF encompasses a broader spectrum of assets with varying levels of risk, implying a higher degree of portfolio diversification. The fund's precision helped it to show a lower drawdown since the start of the year, at just -1.75 percent.

Key facts:

  • Assets under management, AUM - $ 2.82 billion
  • Dividend yield - 0.23%
  • Expense Ratio - 0.60%
  • Number of names of shares in ETF - 54

Companies with the largest ETF allocations:

  • Tesla, Inc. - 9.08%;
  • NIO, Inc. - 7.73%;
  • Enphase Energy, Inc. - 6.98%;
  • Albemarle Corporation - 6.23%;
  • Plug Power, Inc. - 4.61%.

The largest share of allocation by country:

  • USA - 73.53%;
  • China - 12.5%;
  • Israel - 3.99%.

The largest share of allocation by sector:

  • Electronic Technologies - 34.8%;
  • Consumer Durables - 19.4%;
  • Producer Manufacturing - 17.7%.
  • Average P / E Ratio for the portfolio - 31.8x
  • ETF Return YTD - (-1.75%)

How to Buy ETFs?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy ETFs in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type ICLN.US (iShares Global Clean Energy ETF ticker), TAN.US (Invesco Solar ETF ticker), and QCLN.US (First Trust NASDAQ Clean Edge Green Energy Index Fund ticker) in the search box, and select the appropriate ETF in the results. Open a secure session in the trading window on the right, select the number of securities you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type ICLN.US (iShares Global Clean Energy ETF ticker), TAN.US (Invesco Solar ETF ticker), and QCLN.US (First Trust NASDAQ Clean Edge Green Energy Index Fund ticker), and select the appropriate ETF in the results. You will then see the ETF in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of securities you want to buy and click Buy.


Go to Freedom24 web platform >>


*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.



  • Sources of information

    https://www.grandviewresearch.com/press-release/global-renewable-power-generation-market

    https://www.spglobal.com/spdji/en/indices/esg/sp-global-clean-energy-index/#overview

    https://macsolarindex.com

    https://cleanedge.com/indexes/stock-index/cels

  • Recommendation evaluation methodology according to Market Research Terms of Use
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.