While strong structural demand drivers, including the global push for energy security and accelerating electricity demand, support the long-term outlook for clean energy, the sector has struggled this year amid regulatory uncertainty, policy rollbacks and reduced incentives under the Trump administration. Political and regulatory uncertainty has remained a significant overhang, weighing on the sector's outlook until now.
That said, the Democratic Party's victory in the midterm elections could provide a much-needed political tailwind for the clean energy sector. Stronger congressional opposition to the Trump administration's clean energy policy rollbacks could help reduce the risk of further policy setbacks and improve regulatory visibility. This shift in the political landscape could potentially restore investor confidence in the sector.
Markets had largely priced in a sweeping Democratic victory ahead of the election results, with the clean energy sector viewed as one of the potential beneficiaries of a shift in congressional control.
The S&P Global Clean Energy Select Index, which tracks 30 of the largest clean energy companies across developed and emerging markets, rose 7.61% in the first three trading sessions of November, suggesting improving sentiment toward the sector. The rally lifted the index's quarter-to-date return to approximately 0.05%, while adding about 8.65% year to date.
According to a Benzinga article, as quoted on Yahoo Finance, a Congress controlled by Democrats could offer greater support to renewable energy companies by helping safeguard climate-related incentives and pushing back against attempts to weaken emissions regulations. The prospect of greater congressional scrutiny and reduced policy uncertainty could also improve investor sentiment toward clean energy companies, which have faced considerable regulatory headwinds over the past year.
Clean Energy ETFs in Focus
Below, we have highlighted a few ETFs that investors may consider to increase their exposure to the clean energy sector, while maintaining a long-term investment horizon to capitalize on its growth potential.
These funds could benefit from stronger congressional oversight, the potential preservation or restoration of renewable energy incentives and a more supportive regulatory environment. Combined with rising electricity demand and growing investments in energy infrastructure, these factors could create a favorable backdrop for clean energy ETFs.
iShares Global Clean Energy ETF ICLN
iShares Global Clean Energy ETF seeks to track the performance of S&P Global Clean Energy Transition Index with a basket of 102 securities. The fund has gathered an asset base of $1.94 billion and charges an annual fee of 0.38%.
iShares Global Clean Energy ETF has an allocation of about 38.5% to the United States and has a one-month average trading volume of about 5.73 million shares.
First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN
First Trust NASDAQ Clean Edge Green Energy Index Fund seeks to track the performance of NASDAQ Clean Edge Green Energy Index with a basket of 57 securities. The fund has gathered an asset base of $465.9 million and charges an annual fee of 0.59%.
First Trust NASDAQ Clean Edge Green Energy Index Fund has a one-month average trading volume of about 108,000 shares.
Invesco WilderHill Clean Energy ETF PBW
Invesco WilderHill Clean Energy ETF seeks to track the performance of WilderHill Clean Energy Index with a basket of 72 securities. The fund has gathered an asset base of $284.9 million and charges an annual fee of 0.63%.
Invesco WilderHill Clean Energy ETF has an allocation of about 77.5% to the United States and has a one-month average trading volume of about 370,000 shares.
Invesco Global Clean Energy ETF PBD
Invesco Global Clean Energy ETF seeks to track the performance of WilderHill New Energy Global Innovation Index with a basket of 110 securities. The fund has gathered an asset base of 96.5 million and charges an annual fee of 0.75%.
Invesco Global Clean Energy ETF has an allocation of about 24.1% to the United States, followed by double-digit allocations to China (13.9%) and Taiwan (11.5%). PBD has a one-month average trading volume of about 48,000 shares.
ALPS Clean Energy ETF ACES
ALPS Clean Energy ETF seeks to track the performance of CIBC Atlas Clean Energy Index with a basket of 39 securities. The fund has gathered an asset base of $87 million and charges an annual fee of 0.55%.
ALPS Clean Energy ETF has an allocation of about 87.8% to the United States and has a one-month average trading volume of about 19,000 shares.
Fidelity Clean Energy ETF FRNW
Fidelity Clean Energy ETF seeks to track the performance of Fidelity Clean Energy Index with a basket of 76 securities. The fund has gathered an asset base of $83.8 million and charges an annual fee of 0.39%.
Fidelity Clean Energy ETF has an allocation of about 39.6% to the United States and has a one-month average trading volume of about 30,000 shares.
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Invesco WilderHill Clean Energy ETF (PBW): ETF Research Reports
iShares Global Clean Energy ETF (ICLN): ETF Research Reports
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN): ETF Research Reports
Invesco Global Clean Energy ETF (PBD): ETF Research Reports
ALPS Clean Energy ETF (ACES): ETF Research Reports
Fidelity Clean Energy ETF (FRNW): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).