If you would like your investments to help protect the Earth, you might as well go in for the long term and try to make a lot of money as companies specializing in low-emissions and sustainable energy technologies grow.
Below is a screen of alternative-energy companies expected to produce the fastest revenue growth over the next three years.
The United Nations Intergovernmental Panel on Climate Change released its new report on climate change Aug. 9 and said that the past decade had been the warmest over the past 125,000 years. Here are five quick takeaways from the U.N. IPCC’s report. You can read the IPICC’s summaries and download the entire report here.
Climate change is a controversial subject, but regardless of your opinion about governments’ responsibility, as an investor you need to move toward lower emissions, more sustainable power sources, smart electric grids, among other things. Changing your portfolio with the times gives you an opportunity to profit as innovative companies grow quickly.
A diversified investment in one or more exchange traded funds focused on clean energy is one way to do this — it also sets the basis for the stock screen that follows.
Here are the largest five alternative energy ETFs listed by ETF Database.
To begin the screen, we looked at the five largest cloud ETFs:
|ETF||Assets ($ mil)||Expense ratio||Holdings||Strategy|
|iShares Global Clean Energy ETF ICLN, -0.95%||$ 6,117||0.42%||83||Tracks a market cap-weighted index of global clean energy companies, with weighting modified by a an exposure score.|
|Invesco Solar ETF TAN, -2.76%||$ 3,480||0.69%||56||Tracks an index of global solar energy companies, “this cutting out much of the broader renewable energy market,” according to FactSet. The portfolio is weighted to emphasis pure-play solar companies.|
|First Trust Nasdaq Clean Edge Green Energy Index Fund QCLN, -1.47%||$ 2,693||0.60%||53||Tracks a market-cap-weighted index of U.S. clean energy companies.|
|ALPS Clean Energy ETF ACES, -1.47%||$ 953||0.55%||40||Tracks an index of clean energy companies listed in the U.S. and Canada. Portfolio is weighted by market capitalization, subject to a 5% maximum.|
|First Trust Nasdaq Clean Edge Smart GRID Infrastructure Index ETF GRID, +0.36%||$ 449||0.70%||70||Tracks a market-cap-weighted index of global companies in the smart grid and electric infrastructure industries.|
These ETFs have varying strategies, and definitions of alternative or clean energy companies may be broad. For example, electric-vehicle maker Tesla Inc. TSLA, -0.15% also makes solar-power-generation equipment and is held by QCLN, ACES and GRID. Rival EV makers Nio Inc. NIO, +0.00% and Xpeng Inc. XPEV, -0.24% are held by QCLN.
If you are interested in any ETF, you should review the fund manager’s website.
ETF Database says solar energy is the most common industry among companies held by ETFs in the alternative energy category, but that “wind, hydroelectric and geothermal energies are also represented.”
Here’s a comparison of total returns for the five ETFs through Aug. 6:
|ETF, index or sector||Total return – 2021||Total return – 2020||Total return – 3 years||Total return – 5 years||Total return – 10 years|
|iShares Global Clean Energy ETF ICLN, -0.95%||-18%||142%||166%||175%||128%|
|Invesco Solar ETF TAN, -2.76%||-16%||234%||289%||324%||103%|
|First Trust Nasdaq Clean Edge Green Energy Index Fund QCLN, -1.47%||-5%||184%||238%||351%||502%|
|ALPS Clean Energy ETF ACES, -1.47%||-12%||140%||184%||N/A||N/A|
|First Trust Nasdaq Clean Edge Smart GRID Infrastructure Index GRID, +0.36%||21%||49%||100%||178%||292%|
|S&P 500 Index SPX, +0.23%||19%||18%||64%||124%||353%|
|S&P 500 Energy Sector||34%||-34%||-23%||-10%||1%|
Performance among these alternative energy ETFs is mixed, but for the three- and five-year periods, all handily beat the returns of the S&P 500 Index SPX, +0.23%.
Clean-energy stock screen
The five ETFs listed above hold a total of 204 stocks. To project the growth of revenue through 2023, we used calendar 2020 estimates among analysts polled by FactSet as a baseline and then looked at consensus estimates for the subsequent three years, if available. (The 2020 numbers are estimates, because many companies’ fiscal years don’t match the calendar.)
We emphasized revenue because many of these companies are at early stages and are focused on developing products and services and growing their businesses, rather than showing net income.
To ensure a quality set of estimates, we limited the group of companies to those covered by at least five analysts polled by FactSet. For a slight cut to risk, we also eliminated any company with less than $ 10 million in estimated revenue during calendar 2020. The available set of data brought the list down to 135 companies.
Here are the 20 companies projected to have the highest compound annual growth rates (CAGR) for revenue through calendar 2023:
|Company||Country||Estimated revenue – 2020||Estimated revenue – 2021||Estimated revenue – 2022||Estimated revenue – 2023||Projected three-year revenue CAGR||Held by|
|XPeng Inc. ADR Class A XPEV, -0.24%||China||$ 896||$ 2,488||$ 4,437||$ 6,810||96.6%||QCLN|
|Meyer Burger Technology A.G. MBTN, +2.67%||Switzerland||$ 101||$ 111||$ 296||$ 521||73.0%||ICLN, TAN|
|Nio Inc. ADR Class A NIO, +0.00%||China||$ 2,517||$ 5,457||$ 9,072||$ 12,902||72.4%||QCLN|
|Solaria Energia y Medio Ambiente S.A. SLR, -0.74%||Spain||$ 70||$ 123||$ 222||$ 293||61.1%||ICLN, TAN|
|Greenlane Renewables Inc. GRN, +4.00%||Canada||$ 18||$ 37||$ 50||$ 66||53.4%||ACES|
|McPhy Energy S.A. MCPHY, -2.80%||France||$ 17||$ 17||$ 28||$ 59||53.2%||ICLN|
|Xebec Adsorption Inc. XBC, -2.20%||Canada||$ 45||$ 94||$ 134||$ 156||51.6%||ACES|
|Nel ASA NEL, -4.07%||Norway||$ 77||$ 104||$ 161||$ 253||48.7%||ICLN|
|Renova Inc. 9519, -0.11%||Japan||$ 188||$ 257||$ 304||$ 591||46.5%||ICLN, TAN|
|Niu Technologies ADR Class A NIU, -2.06%||China||$ 375||$ 625||$ 906||$ 1,155||45.6%||QCLN|
|Shoals Technologies Group Inc. Class A SHLS, -2.73%||U.S.||$ 175||$ 237||$ 356||$ 525||44.1%||ICLN, TAN, ACES|
|FuelCell Energy Inc. FCEL, -9.38%||U.S.||$ 71||$ 81||$ 133||$ 210||43.5%||ICLN, QCLN|
|Sunnova Energy International Inc. NOVA, -3.79%||U.S.||$ 161||$ 237||$ 343||$ 465||42.4%||ICLN, TAN, QCLN, ACES|
|Enphase Energy Inc. ENPH, -1.63%||U.S.||$ 774||$ 1,336||$ 1,796||$ 2,232||42.3%||ICLN, TAN, QCLN, ACES, GRID|
|Flat Glass Group Co. Ltd. Class H 6865, -12.32%||China||$ 951||$ 1,424||$ 2,077||$ 2,730||42.1%||ICLN, TAN|
|Aemetis Inc. AMTX, -3.98%||U.S.||$ 166||$ 223||$ 301||$ 470||41.5%||ACES|
|Doosan Fuel Cell Co. Ltd. 336260, -1.29%||South Korea||$ 412||$ 424||$ 774||$ 1,145||40.6%||ICLN|
|Grenergy Renovables S.A GRE, -0.51%||Spain||$ 122||$ 174||$ 258||$ 331||39.3%||TAN|
|Tesla Inc. TSLA, -0.15%||U.S.||$ 31,536||$ 50,043||$ 67,624||$ 82,515||37.8%||QCLN, ACES, GRID|
|Daqo New Energy Corp. ADR DQ, -6.77%||China||$ 676||$ 1,468||$ 1,574||$ 1,528||31.2%||ICLN, TAN, QCLN|
Click on the tickers for more about each company.
The following table includes price-to-earnings ratios based on current market capitalizations and consensus net income estimates for calendar 2022 (if they are more than zero) and price-to-sales ratios based on market caps and consensus revenue estimates for calendar 2022.
All numbers feeding the P/E and price-to-sales ratios are in U.S. dollars.
The table also includes summaries of analysts’ opinions about the stocks, with share prices and price targets in local currencies where the stocks are listed.
|Company||Price/ consensus 2022 earnings (if applicable)||Price/ consensus 2022 revenue||Share “buy” ratings||Closing price – Aug. 6||Consensus price target||Implied 12-month upside potential|
|XPeng Inc. ADR Class A XPEV, -0.24%||N/A||6.0||88%||41.22||48.89||19%|
|Meyer Burger Technology A.G. MBTN, +2.67%||N/A||4.4||71%||0.44||0.60||36%|
|Nio Inc. ADR Class A NIO, +0.00%||N/A||6.6||80%||43.84||59.10||35%|
|Solaria Energia y Medio Ambiente S.A. SLR, -0.74%||31.2||10.5||60%||15.90||21.08||33%|
|Greenlane Renewables Inc. GRN, +4.00%||75.7||3.6||100%||1.57||2.91||85%|
|McPhy Energy S.A. MCPHY, -2.80%||N/A||18.8||67%||16.21||26.57||64%|
|Xebec Adsorption Inc. XBC, -2.20%||180.7||3.4||60%||3.77||5.36||42%|
|Nel ASA NEL, -4.07%||N/A||15.2||56%||14.94||24.53||64%|
|Renova Inc. 9519, -0.11%||90.9||10.7||0%||4,595.00||3,678.00||-20%|
|Niu Technologies ADR Class A NIU, -2.06%||21.5||1.7||83%||23.55||38.61||64%|
|Shoals Technologies Group Inc. Class A SHLS, -2.73%||42.0||9.4||75%||32.72||40.92||25%|
|FuelCell Energy Inc. FCEL, -9.38%||N/A||15.3||0%||6.33||8.13||28%|
|Sunnova Energy International Inc. NOVA, -3.79%||N/A||11.7||88%||35.99||54.00||50%|
|Enphase Energy Inc. ENPH, -1.63%||99.1||13.5||64%||179.74||200.55||12%|
|Flat Glass Group Co. Ltd. Class H 6865, -12.32%||6.1||1.1||81%||41.00||33.60||-18%|
|Aemetis Inc. AMTX, -3.98%||N/A||1.0||100%||9.27||30.50||229%|
|Doosan Fuel Cell Co. Ltd. 336260, -1.29%||58.8||3.7||100%||49,950.00||67,230.86||35%|
|Grenergy Renovables S.A GRE, -0.51%||21.7||3.6||100%||27.95||46.55||67%|
|Tesla Inc. TSLA, -0.15%||82.5||10.2||44%||699.10||694.96||-1%|
|Daqo New Energy Corp. ADR DQ, -6.77%||6.9||2.7||77%||58.15||108.65||87%|