There’s renewed support for clean energy exchange-traded funds and, for once, politicians are deserving of some credit for helping out investors.
Recently, Sen. Joe Mnachin (D-WV) and Sen. Kiersten Sinema (D-AZ) agreed to some finer points on a watered down version of President Biden’s “Build Back Better” agenda. Diluted as it may be, the “Inflation Reduction Act” is no shrinking violet when it comes to government spending and it includes plenty of relevant expenditures aimed at renewable energy, including traditional sources such as solar and wind and many more.
“We’re sitting on the precipice of what could be the most impactful climate legislation of our lifetimes,” SunRun CEO Mary Powell told Yahoo Finance Live. “We’re really excited about it. We really see it as fundamentally accelerating this customer-led revolution to a much more sustainable, independent, resilient, and affordable energy system for Americans.”
Among renewable energy companies and investors, enthusiasm for the legislation is palpable, indicating some or all of the following clean energy ETFs could generate more upside.
Global X CleanTech ETF (CTEC)
As a broad-based clean energy fund, the Global X CleanTech ETF (CTEC) is highly responsive to related legislation. A gain of 30.10% over the past month by CTEC proves as much. The $127.52 million CTEC holds 40 stocks, including hydrogen, solar and wind plays among others.
Another point in CTEC’s favor is that allocates just 41.7% of its weight to U.S.-based companies and provides exposure to stocks from more than a dozen countries. That’s relevant because renewable energy adoption is very much a global pursuit.
“There has been meaningful progress in both public and private sector setting goals/targets both for steps toward 2030 as well as carbon neutrality,” Chart Industries CEO Jillian Evanko tells Global X. “For example, less than two years ago there were a few dozen countries with that target and now hundreds have some form of a publicized goal.”
IQ Cleaner Transport ETF (CLNR)
The Inflation Reduction Act is supportive of electric vehicle adoption in a big way and that’s meaningful a variety of clean energy ETFs, including the IQ Cleaner Transport ETF (CLNR).
What’s interesting about CLNR, which tracks the IQ Cleaner Transport Index, as a play on the aforementioned legislation is that while the ETF features Tesla (TSLA) as its largest holding, it’s also home to several other EV manufacturers as well as companies that are suppliers to those producers. That’s a sign CLNR has depth and potentially some ability to weather consumers’ fickle car-buying tastes. What’s not up for debate is CLNR’s compelling outlook as Uncle Sam unleashes massive EV-related spending.
“It should drive demand for EVs and plug-in hybrids, which should benefit the entire EV supply chain,” said Morningstar analyst Seth Goldstein. “EVs last year globally were 5% of new global auto sales. I’d expect there to be a higher adoption rate this year, as well as higher overall EV sales.”
SPDR Kensho Clean Power ETF (CNRG)
With the assistance of the Inflation Reduction Act, the SPDR Kensho Clean Power ETF (CNRG) is setting a torrid pace as of late. The clean energy ETF is higher by 11.57% and is higher by almost 14% year-to-date, making it one of 2022 best-performing non-leveraged ETFs of any stripe.
As is the case with the rival CTEC, CNRG is a broad play on multiple renewable energy themes, making it an ideal ETF for investors that don’t want to focus on a singular concept.
“As climate-focused funds continue to grow in popularity, one question keeps investors up at night: How much of my portfolio is actually addressing climate change?” wrote Morningstar analyst Alyssa Stankiewicz. “In a recent study, we found that climate funds in the U.S., which we define as those with a branded, climate-focused investment mandate, offer more bang for the buck in terms of addressing climate change. Leading the pack in delivering exposure to climate action are clean energy/tech funds, followed by climate solutions funds.”
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Todd Shriber
Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund where he specialized in trading sector and international ETFs leading up to and during the financial crisis. He would later become the web editor at ETF Trends. Currently, he analyzes, researches and writes on ETFs for a variety of Web-based publications and financial services firms.Shriber has been quoted in the Barron's, CNBC.com and the Wall Street Journal. His work has been published on Web sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business and Nasdaq.com.
Read Todd's Bio