• December 2, 2023

Get With the Wind For Renewable Energy Gains

ONAlthough the related stocks were recently withdrawn, renewable energy and clean technology continue to take the energy landscape by storm and disrupt space in a positive way.

As has been widely noted Politics helps The positive argument for renewable energy and exchange-traded funds is the ideal vehicle for accessing the boom for green energy and clean technologies. This particular universe of ETFs is dominated by broad funds that invest in companies that are active in the fields of solar, wind, water / geothermal and biomass / biofuel production, as well as providers of electric vehicles / energy storage, light emitting diodes ( LED) / smart grids and fuel cell technologies.

For those looking to focus on a unique renewable concept, a smaller number of ETFs fills that void and the group is dominated by Solar and wind ETFs, including the First Trust Global Wind Energy ETF (FAN).

FAN, which is nearly 13 years old and has over $ 405 million in assets under management, tracks the ISE Clean Edge Global Wind Energy Index (GWE). For those unfamiliar, Wind enjoys a credible investment thesis, as evidenced by FAN’s 86 percent return last year.

With FAN is Index Methodology Matters

The index of an ETF is one of its most important attributes, but many investors gloss over this characteristic. That shouldn’t happen with any fund, let alone with topics like FAN. In fact, the structure and methodology of the ISE Clean Edge Global Wind Energy Index go a long way in highlighting the benefits of FAN.

“Clean Edge – a leader in indexing and research for clean energy – determines the universe of constituents and, based on primary and secondary sources, only selects companies involved in certain aspects of the wind energy industry such as the development or management of a wind farm; the generation or distribution of electricity from wind power; or participation in the development, manufacture or sale of machines or materials specially developed for industry. ” according to Nasdaq research.

FAN’s benchmark goes further and applies qualifiers to member companies. For example, FAN holdings are “active” in a part of the wind industry, be it the operation of wind farms, power distribution or the manufacture of parts and consumables. This prevents a small number of companies from dominating the fund.

“As part of its research, Clean Edge further subdivides the constituents of the index into Pure Play and Diversified categories, with stricter conditions being applied to the former, including at least 50% or more of revenue and / or asset generation (energy capacity and / or production ) from wind-related activities, ”notes Nasdaq.

Performance issues

After a year that outperformed the S&P 500 by 40 percentage points while topping popular technology indices and broader renewable energy benchmarks, FAN was likely due to a decline.

Since the beginning of the year it has fallen by 7.21 percent, which brings other green energy systems down. That retreat, however, could prove to be more of an invitation to engagement than a reason to avoid the Wind ETF.

Developers are also planning further offshore projects for the coming years. And they are groundbreaking advances in this area, like the development of ever larger turbines with individual blades that are larger than soccer fields. ” according to CNBC.

This growth has been building for a while, but it’s still in its infancy.

“IHS Markit tracked 62.5 GW of new wind turbines in 2019, 22% more than the previous year. While over 90% of them were on land, the offshore sector also remained optimistic, with turbines growing by 45% annually,” the research firm said in a note.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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