Once a niche segment of the broader energy industry, renewable energy is growing by leaps and bounds, slowly becoming an important source of energy in many regions and nations across the globe. According to the International Energy Agency (IEA), renewables reached 30% of global electricity generation capacity in 2020, while the sector is expected to reach $1.51 trillion by 2025.
With many forms of renewable energy becoming all the more economically viable, consumers have started to embrace these technologies amid growing concerns over carbon dioxide emissions. And as clean energy stocks have acquired lofty valuations thanks to a shift away from fossil fuels, the COVID-19 pandemic has further pushed environmental, social and governance-conscious investors to look into this industry and tap into sustainable stocks.
Looking to build up your portfolio in the renewable energy space? With a strong asset base, lower expense ratio and impressive performance so far, the iShares Global Clean Energy ETF (ICLN) is certainly a hands-down winner in this space.
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Fund snapshot
| Fund launch date | June 24, 2008 |
| Issuer | BlackRock |
| Brand | iShares |
| Exchange | Nasdaq |
| Net assets | $5,742,945,014 |
| Net Asset Value (NAV) | $23.74 |
| Shares outstanding | 241,900,000 |
| Dividend frequency | Semi-annually |
| Annual dividend | $0.03 |
| Yield | 0.41% |
| Competing ETFs | TAN, ACES, SMOG |
ICLN overview
ICLN seeks to track the S&P Global Clean Energy Index which currently comprises 30 leading clean energy-related stocks. More specifically, these companies operate in a range of sub-sectors including biofuels, ethanol, geothermal, hydroelectric, solar and wind, as well as companies that develop technology and equipment used in the process. The ETF takes large concentrated positions in these companies, which are then weighted by market cap and rebalanced on a quarterly basis so that it can hone in on the clean energy theme.
So why invest in ICLN? One of the largest renewable energy ETFs with over $5 billion in assets as of April 16, 2021, ICLN offers investors exposure to companies that produce energy from solar, wind and other renewable sources, a sector with great potential, while it also offers targeted access to clean energy stocks from around the world.
What are ICLN’s top holdings?
The ICLN ETF has 30 stock holdings, many of which consist of mid-cap and small-cap clean energy companies. Electrical utilities account for 37.77%, heavy electrical equipment 15.37%, while renewable electricity amounts to 14%. Other sectors include semiconductor equipment which accounts for 12.40%, electrical components and equipment at 10.74% and semiconductors at 3.76%, amongst others.
From a geographical standpoint, US-based companies top the list at 37.57%, followed by Denmark at 14.36%, Spain at 7.07% and Canada at 6.80%. Meanwhile, China-based companies amount to 6.80%, Italy 4.79% and Portugal 4.32%, amongst others.
Here is a breakdown of the ETF’s top 10 holdings.
| TICKER | COMPANY | MARKET VALUE ($) | NET ASSETS% |
| VWS | VESTAS WIND SYSTEMS | 448,054,638.45 | 7.92 |
| NZD | NZD CASH | 426,664,060.47 | 7.54 |
| ORSTED | ORSTED | 364,877,020.50 | 6.45 |
| ENPH | ENPHASE ENERGY INC | 299,342,104.81 | 5.29 |
| IBE | IBERDROLA SA | 247,804,521.85 | 4.38 |
| NEE | NEXTERA ENERGY INC | 246,778,370.70 | 4.36 |
| XEL | XCEL ENERGY INC | 243,906,712.57 | 4.31 |
| ENEL | ENEL | 239,563,057.53 | 4.23 |
| PLUG | PLUG POWER INC | 211,899,251.76 | 3.74 |
| SEDG | SOLAREDGE TECHNOLOGIES INC | 206,353,563.75 | 3.65 |
What has ICLN’s performance been like?
The past year has been monumental for the industry as clean energy ETFs just like ICLN delivered blockbuster runs to the upside. Much of this enthusiasm was centred around U.S. President Joe Biden’s support and promise for financial support for the clean energy industry. As a result, ICLN shelled out 141% in returns during the last calendar year, while the ETF saw net creations exceed $2.6 billion in 2020.
Historically, the average annual total returns the ETF has generated include the following:
1 year: 151.73%
3 years: 38.67%
5 years: 23.74%
10 years: 5.22%
According to the MSCI ESG Fund Rating which measures the resiliency of portfolios to long-term risks and opportunities that may arise from environmental, social and governance (ESG) factors, ICLN has scored an A - with AAA regarded as the best and CCC as the worst - and a quality score of 6.8 out of 10. ICLN’s rating reflects that the ETF can effectively manage ESG issues, while it may be more resilient to any disruptions arising from these events.
Here is a hypothetical scenario:
If you had invested $10,000 on June 14, 2008 and if we assume that all dividends and capital gains have been reinvested, on January 7, 2021, your initial investment would be worth $8,498.73.
So is ICLN a buy?
The COVID-19 pandemic has intensified the need for strong climate change policies if we must prevent an environmental global crisis. According to IMF data, the European Union (EU) has committed 20.2% of its total stimulus spending so far towards green and climate-related objectives. This figure is quite high when compared to the measly 1 to 3% allocated by large countries like the likes of U.S., India and China, however, U.S. President Joe Biden’s $2 trillion commitment to green energy could have an important impact in the fight towards achieving decarbonisation in a post-COVID world.
It has certainly been an eventful year for clean energy stocks after their stellar gains last year, while the sheer growth potential of the renewable energy sector means that some of ICLN’s top holders have had the opportunity to thrive. A Spain-based multinational electric utility company, Iberdrola (IBE) engages in the generation, distribution and trading of electricity, while it specialises in clean energy, including wind, mini-hydro, solar thermal, photovoltaic and biomass. The company’s total renewables earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 8% to €2.59 billion, while offshore wind earnings accounted for €585 million to the EBITDA. In February 2021, the company announced a record investment of €9.24 billion, whereas in 2021, the company expects to achieve a net profit of between €3.7 billion and €3.8 billion.
One more notable holding is Vestas Wind Systems (VWS), a Denmark-based wind energy company which develops, manufactures and installs wind turbines. The company has installed these in scores of countries across the globe, whereas it also provides contracts, spare parts and related activities. Meanwhile, another stronghold with 5.29% weight in the ETF, Enphase Energy (ENPH), the world’s leading supplier of micro inverter-based solar-plus-storage systems, soared 400% by the end 2020.
Yet, there are other factors that make ICLN an attractive investment. The cost of renewable energy has seen a continuous drop over the past couple of years, so much so that in 2018, U.S. prices fell below those of coal, while prices reached new lows in 2019. Cheaper renewable energy is set to boost ICLN further as mass consumer adoption driven by lower electricity costs comes into effect.
Then there is the growth prospects of the clean energy sector itself. As more cities, utilities and businesses continue to pursued their decarbonisation plans, while demand for clean energy in the U.S. and elsewhere continues to be resilient, renewable energy is likely to experience significant growth. In December 2020, the share of renewables generation exceeded that of coal for 153 days compared with 39 days in 2019.
And sure, the transition to clean energy will take trillions of dollars or euros and several decades to complete, however, with its underlying companies being market leaders in their respective sectors and poised to capture the growth potential over the long term, this means that the ICLN ETF is strategically positioned to reap the benefits.
How to invest in the ICLN ETF with Moneybase Invest
Ready to invest in ICLN? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account. To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. ICLN has been added to your portfolio.
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