After emerging as the hottest sector in the energy universe amid the ESG and clean energy push, renewable energy stocks and funds finally came unstuck in 2021 thanks to steep valuations and massive supply chain disruptions. The iShares Global Clean Energy ETF (ICLN), a catch-all bet on clean energy, is down 9.1% over the past 12 months compared to a 56.9% gain by its much bigger fossil fuel cousin, the Energy Select Sector SPDR Fund (NYSEARCA:XLE). XLE has also taken the lead in attracting new money, pulling in $1.75B over the past year compared to ICLN's $907.9M. But the tables have quickly turned ever since Russia invaded Ukraine.
ICLN has seen an inflow surge of $266M since March 1, while XLE has seen $1.46B walk out the door as Russia's war on Ukraine shines a spotlight on energy security and also signifies a potential top for oil and gas stocks as market players take profits. Higher and volatile oil and gas prices also make the case for renewables more attractive.
Overall, renewable energy funds recorded $642 million in inflows in the month of March, breaking a 3-month losing streak that saw $1.9B in outflows.
Source: Seeking Alpha
The global and political landscape is intimately connected to the energy market. The war in Ukraine was directly responsible for oil prices soaring in recent weeks. By sending the price of oil and gas higher, the war has also made the case for energy independence increasingly important.
And, Lithuania has become the first European nation to completely wean itself off Russian energy:
"From now on Lithuania won't be consuming a cubic cm of toxic Russian gas," tweeted Prime Minister Ingrida Šimonyte.
The country has turned to liquefied natural gas for its energy needs after emphasizing energy security and opening an LNG terminal in the port of Klaipeda in 2014. "If we can do it, the rest of Europe can do it too," added Lithuanian President Gitanas Nauseda.
Europe has not always been so reliant on Russia for its energy needs, in fact, in the past it managed to supply itself with nearly all of its natural gas needs. Unfortunately, production dropped off sharply after North Sea gas fields became depleted in the 1970s, prompting the continent to look for foreign suppliers. Russia's reserves were larger and cheaper than any other nearby sources, so infrastructure and pipelines were built to easily connect the grids. Generating EU power from coal and nuclear has also been phased out in recent decades due to renewable energy goals and anti-nuclear movements. Related: U.S. Drilling Activity Has Risen 60% In One Year
Oil and gas ETFs are likely to continue outperforming their green energy peers in the short term, though fund flows suggest that the sector might be overbought. Over the long-term, however, green energy appears to be the safer play as countries all over the world double down on renewable energy as they look to achieve energy independence.
Here are the top clean energy funds.
#1. iShares Global Clean Energy ETF
AUM: $5.4B
Expense Ratio: 0.42%
The iShares Global Clean Energy ETF (NASDAQ:ICLN) is a clean energy fund launched by BlackRock in 2008. ICLN invests in stocks of companies operating across clean energy sectors. It invests in growth and value stocks of companies across diversified market capitalization. It invests in stocks of companies that directly promote environmental responsibility.
ICLN's top 5 holdings are:
- Vestas Wind Systems A/S (OTCPK:VWDRY)
- Enphase Energy Inc.(NASDAQ:ENPH)
- Orsted A/S (OTCPK:DOGEF)
- Consolidated Edison Inc. (NYSE:ED)
- SolarEdge Technologies Inc. (NASDAQ:SEDG)
#2. First Trust NASDAQ Clean Edge Green Energy Fund Index
AUM: $2.7B
Expense Ratio: 0.60%
The First Trust NASDAQ Clean Edge Green Energy Fund Index (NASDAQ:QCLN) is an exchange-traded fund launched and managed by First Trust Advisors L.P. The fund invests in stocks of companies that directly promote environmental responsibility. It seeks to track the performance of the NASDAQ Clean Edge Green Energy Index, by using full replication technique.
QCLN's top 5 holdings are:
- ON Semiconductor Corp (NASDAQ:ON)
- Tesla Inc. (NASDAQ:TSLA)
- Albemarle Corp (NYSE:ALB)
- Enphase Energy Inc.
- NIO Inc. (NYSE:NIO)
#3. Invesco WilderHill Clean Energy ETF
AUM: $1.4B
Expense Ratio: 0.61%
Invesco WilderHill Clean Energy ETF (NYSEARCA:PBW)is an exchange-traded fund launched and managed by Invesco Capital Management LLC in 2005. The fund invests in stocks of companies operating across energy, utilities, alternative energy resources, independent power and renewable electricity producers, and renewable electricity sectors. PBW invests in stocks of companies that directly promote environmental responsibility and seeks to track the performance of the WilderHill Clean Energy Index by using the full replication technique.
- Sociedad Quimica Y Minera De Chile SA (NYSE:SQM)
- Daqo New Energy Corp (NYSE:DQ)
- JinkoSolar Holding Co Ltd (NYSE:JKS)
- Infrastructure and Energy Alternatives Inc. (NYSE:IEA)
- Woodward Inc. (NASDAQ:WWD)
#4. Invesco Solar ETF
AUM: $2.5B
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Expense Ratio: 0.66%
Invesco Solar ETF (NYSEARCA:TAN) is an exchange-traded fund that's solely dedicated to companies in the solar sector. The ETF tracks the MAC Global Solar Energy Index, which itself tracks companies involved in a wide range of solar technologies, provision of raw materials, manufacturing, installers, solar plant operations, etc. Currently, TAN is the only ETF strictly devoted to solar energy, thus providing excellent exposure to the sector. Related: Vitol: Oil Is Underpriced For Current Supply Risks
TAN boasts assets under management (AUM) of $1.76B and an expense ratio of 0.71%.
TAN's top 5 holdings include:
- SolarEdge Technologies
- Enphase Energy Inc.
- Xinyi Solar Holdings Ltd (OTCPK:XISHY)
- First Solar Inc. (NASDAQ:FSLR)
- Sunrun Inc. (NASDAQ:RUN)
#5. First Trust Global Wind Energy ETF
AUM: $332.2M
Expense Ratio: 0.60%
Another First Trust Advisors L.P. clean energy fund, First Trust Global Wind Energy ETF (NYSEARCA:FAN) invests in stocks of companies operating across utilities, electric power by wind energy, independent power and renewable electricity producers, independent power producers and traders, and renewable electricity sectors. The fund invests in stocks of companies that directly promote environmental responsibility and seeks to track the performance of the ISE Clean Edge Global Wind Energy Index, by using full replication technique.
- China Longyuan Power Group Corp Ltd (OTCPK:CLPXF)
- Northland Power Inc. (OTCPK:NPIFF)
- Orsted A/S
- Vestas Wind Systems A/S
- Siemens Gamesa Renewable Energy SA (OTCPK:GCTAF)
By Alex Kimani for Oilprice.com
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