Investors are rushing toward greener stocks ahead of 2020 elections, which is now less than a month away. This is especially true as the former vice president Joe Biden, who proposed to build a green and clean infrastructure, is leading Donald Trump in the polls. Additionally, interest in environmental, social and governance investing has been rising rapidly with firms across the globe investing in clean tech business.
Amid the sector rally, the world’s biggest provider of wind and solar energy NextEra Energy NEE outpaced over-a-century-old giant ExxonMobil XOM as the biggest energy or utility company by market capitalization.
Biden Plans to Go Greener
Democratic presidential nominee aims to pump $2 trillion into green energy over four years to build solar panels, charging stations and more. A Biden presidency is touted to spur tens of thousands of new wind turbines and millions of new solar panels across the United States to rapidly achieve zero-carbon energy. The plan will eliminate carbon emissions from the power grid by 2035 and accelerate the uptake of electric vehicles. Biden also aims to put the United States on the path to achieve a 100% clean energy economy with net-zero emissions no later than 2050 (read: Sector ETFs to Win/Lose If Biden Wins Elections).
Rise in Renewable Demand
Global renewable energy consumption has been growing exponentially at an average annual rate of 13.7% over the past decade. It is the only category of energy that grew globally at double digits over the past decade. Consumption grew 12.2% annually in 2019. Falling cost of renewable energy generation has led to strong growth. Over the past 10 years, the cost of solar panels has plunged 82%, onshore wind costs have skidded 39% and the cost of offshore wind has fallen 29%, according to the International Renewable Energy Agency.
The latest data from the U.S. Energy Information Administration showed that 18% of the U.S. electricity generation came from alternative energy in 2019 versus 10% in 2009.
Though COVID-19 has led to slowdowns in deployment of renewable energy projects, the International Energy Agency (IEA) estimates that renewable energy generation will grow by 5% this year — the only source of energy production with an upward trajectory. The world currently gets about a third of its energy from renewable sources.
Goldman Sachs projects spending on renewable energy to overtake that on oil and gas drilling next year for the first time. The investment bank sees clean energy opportunities through 2030 (read: Here’s Why Clean Energy ETFs Are Shining Bright).
Firms across the globe have been spending higher on clean energy with China, United Sates and Europe leading the way. China is responsible for around 70% of all solar photovoltaic panels. Germany gets nearly half of its energy from renewables, according to Clean Energy Wire. BP plc (BP) plans to decrease oil production by 40% over the next decade while investing $5 billion by 2030 in clean tech.
Given the bullish trend, clean energy stocks and ETFs are soaring this year. Below we have highlighted the best five from each corner:
Invesco Solar ETF TAN – Up 144.1%
This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 32 stocks in the basket. It is moderately concentrated across components with each making up for not more than 10.5% of the assets. U.S. firms dominate the fund’s portfolio with nearly 49.4% share, followed by China (23.5%) and Germany (5.5%). The product has amassed $1.5 billion in its asset base and trades in a solid volume of around 882,000 shares a day. It charges investors 71 basis points in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Best Performing ETFs of the Third Quarter).
ALPS Clean Energy ETF ACES – Up 82.8%
This fund seeks to track the performance of an index comprising U.S. and Canada-based companies that primarily operate in the clean energy sector. It has amassed $391.3 million in its asset base and charges 65 bps in fees per year from investors. It trades in a moderate average daily volume of around 66,000 shares and holds 33 securities in its basket with none making up for more than 9.1% share.
SPDR S&P Kensho Clean Power ETF CNRG – Up 80.8%
This ETF offers exposure to companies whose products and services are driving innovation behind the clean energy sector, which includes the areas of solar, wind, geothermal and hydroelectric power. It follows the S&P Kensho Clean Power Index and holds 40 stocks in its basket with each accounting for less than 8.5% share. The product has managed assets worth $62.3 million in its asset base while trades in average daily volume of 20,000 shares. It charges 45 bps in annual fees.
iShares Global Clean Energy ETF ICLN – Up 80.2%
This fund provides global exposure to 30 companies that produce energy from solar, wind and other renewable sources by tracking the S&P Global Clean Energy Index. Each firm makes up for no more than 9.1% of assets. It has amassed $1.5 billion in its asset base while volume is also moderate at about 2.2 million shares. United States and China take the top two spots in terms of country exposure with 44% and 13.5% share, respectively. The ETF charges 46 bps in annual fees and expenses (read: Why Clean Energy ETFs Are Top Performers in 2020).
Invesco Global Clean Energy ETF PBD – Up 70.3%
This product follows the WilderHill New Energy Global Innovation Index and offers exposure to companies engaged in the business of the advancement of cleaner energy and conservation. It holds 99 securities in its basket with each accounting for no more than 2.2% share. American firms make up for the largest share at 25.4% while China and Canada rounded off the next two spots. PBD has AUM of $105.1 million and trades in average daily volume of 49,000 shares. It charges 75 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Pacific Ethanol Inc. PEIX – Up 1206.1%
This company produces and markets low-carbon renewable fuels and alcohol products in the United States. With a market cap of $483.8 million, it has a Zacks Rank #2 and Growth Score of A.
Vivint Solar Inc. VSLR – Up 495%
It is a provider of residential solar energy systems in the United States and is engaged in designing, installing and maintaining cost-effective solar energy systems. The stock has a market cap of $5.4 billion and a Zacks Rank #3 (read: Clean Energy ETFs in Focus on Sunrun-Vivint Solar Deal).
SolarEdge Technologies Inc. SEDG – Up 185.9%
This company designs, develops and sells direct current optimized inverter systems for solar photovoltaic installations worldwide. With a market cap of $13.6 billion, it has a Zacks Rank #2 and Growth Score of B.
Bloom Energy Corporation BE – Up 161.4%
This company generates and distributes renewable energy. It supplies electricity to the residential, commercial and industrial sectors. The stock, having a market cap of $2.6 billion, has a Zacks Rank #3 and Score of A.
Azure Power Global Ltd. AZRE – Up 155.2%
With a market cap of $1.5 billion, Azure Power is a producer and developer of solar energy. The stock has a Zacks Rank #2.
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Exxon Mobil Corporation (XOM): Free Stock Analysis Report
NextEra Energy, Inc. (NEE): Free Stock Analysis Report
Pacific Ethanol, Inc. (PEIX): Free Stock Analysis Report
Vivint Solar, Inc. (VSLR): Free Stock Analysis Report
SolarEdge Technologies, Inc. (SEDG): Free Stock Analysis Report
iShares Global Clean Energy ETF (ICLN): ETF Research Reports
Invesco Solar ETF (TAN): ETF Research Reports
Invesco Global Clean Energy ETF (PBD): ETF Research Reports
Azure Power Global Ltd. (AZRE): Free Stock Analysis Report
Bloom Energy Corporation (BE): Free Stock Analysis Report
ALPS Clean Energy ETF (ACES): ETF Research Reports
SPDR SP Kensho Clean Power ETF (CNRG): ETF Research Reports
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