Quick Take: Global commitments to triple renewable energy capacity by 2030 are supporting long-term interest in clean energy investments. Investors can gain targeted sector exposure across nuclear power, hydrogen fuel cells, and energy storage through thematic funds like the Global X Uranium ETF (URA), Global X Hydrogen ETF (HYDR), and Global X Lithium & Battery Tech ETF (LIT).
Why Clean Energy ETFs Offer Long-Term Portfolio Growth
With the world fighting to go green, clean energy stocks are a safe long-term bet.
For one, at the 2023 Conference of the Parties (COP28) meeting, 200 countries agreed to transition from fossil fuels, drafting text that would result in “tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030,” according to CNBC.
Two, according to the International Energy Agency (SYM: IEA), the world has a “real chance” of achieving those COP28 targets. The agency added that the world added about 510 gigawatts of renewable energy capacity in 2023, a 50% jump year over year.
Even companies like Honeywell are realigning business around renewables. According to CEO Vimpal Kapur, “Honeywell is in a unique position to both help the world meet today’s growing energy needs, while also enabling the energy transition,” as also added by CNBC.
However, this is just the start.
With global leaders getting far more serious about transitioning to clean energy, you may want to add clean energy funds to your portfolio, including:
3 Targeted Clean Energy ETFs for Sector Diversification
1. Global X Uranium ETF (SYM: URA) — Nuclear Energy Resurgence
Look at the Global X Uranium ETF (SYM: URA), for example.
With an expense ratio of 0.69%, the ETF invests in companies involved in uranium mining and production, including those in extraction, refining, exploration, or manufacturing of equipment for the uranium and nuclear industries.
When investing in commodity-driven infrastructure, selecting funds that hold economic moat stocks may help investors identify businesses with durable competitive advantages, although commodity price volatility remains a risk.
2. Global X Hydrogen ETF (SYM: HYDR) — Next-Gen Fuel Tech
There’s also the Global X Hydrogen ETF. With an expense ratio of 0.5%, the ETF offers solid diversification with key hydrogen stocks. This one invests in stocks involved with hydrogen production, and the development and manufacturing of hydrogen fuel cells.
3. Global X Lithium & Battery Tech ETF (SYM: LIT) — EV & Storage Boom
Also, look at the Global X Lithium & Battery ETF. With an expense ratio of 0.75%, this one invests in stocks involved with mining, refining, and battery production.
Investors building a balanced growth and income portfolio around green transition stocks can also explore covered-call income opportunities through Portfolio Payouts, while considering the associated risks.
Frequently Asked Questions About Clean Energy ETF Investing
Q1: Why should investors consider ETFs instead of individual clean energy stocks?
A: Clean energy companies can experience high price volatility due to regulatory shifts and technological changes. Investing through ETFs like URA, HYDR, or LIT spreads risk across dozens of companies within a sector rather than relying on a single stock.
Q2: What role does nuclear energy play in renewable portfolio diversification?
A: Nuclear energy provides reliable, low-carbon electricity that can complement intermittent renewable sources like solar and wind. ETFs like the Global X Uranium ETF (URA) give investors exposure to the uranium mining and nuclear infrastructure industries supporting nuclear energy expansion.
Q3: Are clean energy ETFs suitable for long-term investors?
A: Clean energy ETFs may appeal to long-term investors seeking exposure to the energy transition. Global initiatives, including the COP28 goal to triple renewable energy capacity by 2030, could support long-term demand for clean energy, energy storage, and related technologies. However, these funds can experience significant volatility and may not be suitable for every investor.
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Written by Ian Cooper