The PBW ETF: A Strong Renewable Energy Play | ETF Trends

With Joe Biden set to become the 46th president of the United States this week, which investment themes are projected to benefit from his administration?

That group includes renewable energy and exchange traded funds such as the Invesco WilderHill Clean Energy ETF (PBW).

PBW seeks to track the investment results (before fees and expenses) of the WilderHill Clean Energy Index. The underlying index is composed of stocks of publicly traded companies in the United States that are engaged in the business of the advancement of cleaner energy and conservation. Stocks are included in the underlying index based on the index provider’s evaluation that such companies will substantially benefit from a societal transition toward the use of cleaner energy and conservation.

“Investors embraced climate change themed ETFs in the fourth quarter of 2020. Joe Biden’s election provided a boost to climate-related ETFs, as investors anticipated that his administration would prioritize fighting climate change more than Donald Trump and team did,” according to CFRA Research’s Todd Rosenbluth.

PBW 1 Year Performance

PBW: A Pertinent Plan for 2021

While the political climate in the nation’s capital remains hostile, it’s also ripe for more renewable energy investment, and that’s a credible catalyst for PBW.

“The Democrats’ newly reclaimed control over the upper chamber does not guarantee easy passage for big climate and clean energy legislation. Democrats have a narrower majority in the House than last Congress, and political polarization is still rampant across Washington, D.C.,” reports S&P Global Market Intelligence.

Adding to the PBW thesis is that renewable energy adoption is a truly global theme, with help coming from some of the world’s largest economies.

“PBW’s largest holdings are from the Industrials sector (39% of assets), while the fund has just 6% in Utilities. In addition to Information Technology (22% of assets), PBW also has a meaningful stake in Consumer Discretionary (21% of assets) companies,” notes Rosenbluth.

PBW takes a different approach than what is seen in other traditional clean energy ETFs. Many of the legacy funds in this space focus on one alternative energy concept, such as solar or wind power. Buoyed by double-digit growth rates in global solar installations over the next decade, ACES, with a substantial solar weight, could be a long-term winner.

The fund is already up 15.13% to start 2021.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.