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Renewable Energy ETFs Look Like a Good Long-Term Play


The Group of Seven developed industrial nations have agreed to significantly cut down fossil fuel consumption in a bid to diminish harmful greenhouse gas emissions, potentially setting the stage for renewable energy and sector-related exchange traded funds.

Those who are interested in investing in clean and renewable energy technologies can take a look at broad ETF options. For instance, the PowerShares WilderHill Clean Energy Portfolio (PBW) and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) focus on U.S. clean energy companies, while the Market Vectors Global Alternative Energy ETF (GEX) and PowerShares Global Clean Energy Portfolio (PBD) cover global companies. [Improving Technology, Falling Costs Lift Clean Energy ETFs]

These ETFs include a range of alternative energy firms, including big names like Tesla (TSLA), SunEdison (SUNE) and SolarCity (SCTY).

The global clean energy ETFs include many international names, but they also have a significant U.S. tilt. For instance, GEX tracks 60.0% U.S., along with China 11.6%, Denmark 11.4%, Spain 3.9%, Italy 3.1% and Japan 3.0%, among others. PBD includes U.S. 31.7%, followed by China 18.1%, Taiwan 5.4%, Hong Kong 5.2%, Denmark 5.2% and Germany 5.1%.

Potentially fueling greater interest in renewable technologies, leaders of the U.S., Germany, France, the U.K., Japan, Canada and Italy said they supported reducing emissions by 40% to 70% by 2050 from 2010 levels, the first precise long-term target, the Financial Times reports.

“Today, for the first time ever, G7 leaders have rallied behind a long-term goal to decarbonise the global economy,” Jennifer Morgan, director of the global climate program at the World Resources Institute, said in the FT article. “This long-term de-carbonization goal will make evident to corporations and financial markets that the most lucrative investments will stem from low-carbon technologies.”

The sharp reduction in emissions projections suggests that industries like coal, oil and gas could experience a significant shift in demand. Martin Kaiser, head of international climate politics at Greenpeace, argued that the G7 leaders’ decision signals the end of the age of fossil fuels.

“The vision of a 100% renewable energy future is starting to take shape while spelling out the end of coal,” Kaiser said, according to renews. “The decisions made by the G7 today indicated an acknowledgement that there needs to be a phase-out of climate-killing coal and oil by 2050 at the latest.”

Coal stocks have been steadily declining, with the Market Vectors-Coal ETF (KOL) , which tracks the coal industry, down 14.8% year-to-date and 31.6% over the past year. Meanwhile, renewable energy ETFs have been strengthening. Year-to-date, PBW gained 8.8%, QCLN rose 13.2%, GEX increased 17.0% and PBD advanced 16.3%. [Coal ETF Outlook Growing Dim]

For more information on the renewables space, visit our renewable energy category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.