ETFs
Clean Energy ETFs Soar as Global Investments Surge – June 17, 2024
Growing interest in finding alternative energy sources and the global decline in the reliability of fossil fuels have led to increased investment in clean energy sources. Escalating climate challenges have made investments in clean energy a top priority.
Global economies have increased their investments in the clean energy sector, with total global energy investments expected to exceed $3 trillion for the first time in 2024, according to the International Energy Agency’s annual report. Global Energy Investment Report.
Increased investment in clean energy
According to the IEA report, around $2 trillion should be allocated to clean technologies such as renewable energy, electric vehicles, nuclear power, low-emission fuels and efficiency improvements.
With coal, gas and oil getting the remaining trillion dollars, nearly two dollars are invested in clean energy for every dollar spent on fossil fuels. The increase in allocation to clean energy sources is indicative of the dynamics behind which global economies are increasingly interested in achieving net zero carbon emissions.
Where are the global economies?
According to the IEA report, China leads global economies in clean energy investment, contributing $675 billion thanks to strong demand for solar power, lithium batteries and electric vehicles. Europe and the United States are following suit, with an investment of $370 billion and $315 billion respectively, with the three largest economies accounting for more than two-thirds of global clean energy investment.
However, significant disparities remain in energy investment, with limited investment coming from emerging and developing economies outside of China. Investments from emerging and developing economies are expected to exceed $300 billion, with India and Brazil leading the way, accounting for only about 15% of global clean energy investments.
The financial consequences of climate change on economies
According to a research paper, as quoted on the Gaurdian, an increase in global temperature of 1°C results in a loss of 12% of global GDP. This is much worse when compared to the decline in global wealth due to financial losses suffered in a prolonged and ongoing war.
Climate scientists estimate that an increase of 3°C (5.4°F) could occur by the end of this century due to the continued burning of fossil fuels. This is expected to lead to a sharp decline in production, capital and consumption, exceeding 50% by 2100. This estimate can be supported by increased investment in coal. Permits for unabated coal-fired power generation exceeded 50 gigawatts in 2023, the highest level since 2015, according to the IEA report.
According to the research paper, rising temperatures, more frequent and intense extreme weather events, and greater precipitation are predicted to cause $38 trillion in damages per year, by mid-century.
Focus on ETFs
Increasing investment in clean energy highlights the growing commitment of global economies to combating climate change. With expectations of continued growth, investing in clean energy ETFs is becoming increasingly attractive.
Below, we highlight a few ETFs that allow investors to increase their exposure to clean energy.
iShares Global Clean Energy ETF (Quick quote ICLNICLN – Free report) has gained 13.04% over the past month and 7.61% over the past three months.
First Trust NASDAQ Clean Edge Green Energy Index Fund (Quick quote QCLNQCLN – Free report) has gained 16.71% over the past month and 7.13% over the past three months.
Invesco WilderHill Clean Energy ETF (Quick quote PBWPBW – Free report) gained 12.83% over the past few months but lost 2.65% over the past three months.
ALPS Clean Energy ETF (ACES Quick QuoteA.S. – Free report) gained 17.35% over the last month and 5.38% over the last three months.
SPDR S&P Kensho Clean Power ETF (Quick quote CNRGCNRG – Free report) has gained 15.47% over the past month and 7.89% over the past three months.
Investors can increase their exposure to solar energy by investing in funds focused on the power generation technique. According to the IEA, as quoted in The Economic Timesinvestments in solar energy are expected to reach $500 billion in 2024, surpassing combined investments in all other power generation technologies.