Why Now’s The Time for a Clean Energy ETF
This article was originally published on ETFTrends.com.
With tech driving some of the market’s big moves this year, where should investors go next? There’s a strong argument for clean energy tech to be the place, particularly with the Fed’s rate pause Wednesday. That looming recession that defined the narrative so far this year no longer threatens as much, either. More bullish investors, then, may want to see how a clean energy ETF can ride a burgeoning clean energy sector.
Why now? Well in the first five months of 2023, U.S. wind and solar generated more power than coal. While renewables generated more energy than coal-based plants did in 2020 and 2022, that included hydropower in the former category. The “rapid retirement” of coal will only boost increased R&D into batteries, the power grid, and of course, clean energy generation itself.
Meanwhile, the Biden administration’s clean energy tax credit regime is arriving to the market. Set up by the Inflation Reduction Act, the credit market will add needed capital to renewable generators. The new credits offer a simpler way for those clean energy firms to raise capital compared to “clunkier,” older systems.
See more: "The Investment Case for the Energy Transition Portfolio"
Taken together, these trends underline the case for investing in a clean energy ETF like the ALPS Clean Energy ETF (ACES) right now. ACES charges 55 basis points to track the CIBC Atlas Clean Energy Index that targets renewables and clean tech. The ETF holds the likes of Tesla (TSLA) and Rivian (RIVN) as well as First Solar (FSLR) in its top holdings according to VettaFi. ACES has returned 9.1% over the last month, too, spiking compared to 2.5% returns YTD.
Notably, ACES also offers some dividends to add to its case, with a 1.1% annual dividend yield. ACES has also seen its price rise above its 50-day Simple Moving Average (SMA), priced at $46.6 vs. its $43.5 50-day SMA. For investors looking for the right clean energy ETF, ACES stands out as a notable option.
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