Clean-energy stocks suffered a prolonged correction after their 2020 surge, as higher interest rates, rising project costs and intense competition challenged the sector. Following a strong recovery in 2025 and early 2026, valuations are less extreme—but investors still need to choose carefully between very different clean-energy ETFs.
Clean energy presents investors with an apparent contradiction.
The underlying industry continues to expand at record speed. Renewable-power capacity increased by 692 gigawatts in 2025, a 15.5% annual rise, according to the International Renewable Energy Agency. Solar and wind jointly accounted for nearly 97% of new renewable capacity. IRENA’s Renewable Capacity Statistics 2026 also shows that renewables represented 85.6% of all power-capacity additions during the year.
Yet many publicly listed clean-energy companies spent several years delivering deeply negative returns.
The divergence demonstrates an important investment lesson: rapid industry growth does not automatically produce attractive shareholder returns. Financing costs, competition, margins, valuations and capital requirements matter just as much as the number of solar panels, wind turbines or batteries installed.
After the sector’s severe correction and subsequent rebound, clean-energy ETFs may once again deserve attention. However, investors should treat them as volatile thematic allocations—not as substitutes for diversified global equity funds.
The clean-energy correction in numbers
The iShares Global Clean Energy Transition UCITS ETF provides a useful illustration of the sector’s cycle.
After gaining 140.24% in 2020, the fund recorded four consecutive negative calendar years:
| Year | Fund return in USD |
| 2020 | +140.24% |
| 2021 | –24.07% |
| 2022 | –5.61% |
| 2023 | –20.53% |
| 2024 | –26.07% |
| 2025 | +46.00% |
| First half of 2026 | +25.10% |
The four-year decline from 2021 through 2024 reduced the value of the fund by approximately 58% cumulatively. Even after its powerful 2025 recovery, it remained well below the level implied by its 2020 peak.
As of 30 June 2026, the fund had gained 58.14% over the previous 12 months but had still produced an annualised return of –1.62% over five years. These figures show both sides of thematic investing: substantial rebound potential and severe long-term volatility. The official iShares June 2026 factsheet provides the complete performance history.
Past performance does not predict future results, and the recent rally means investors are no longer buying at the absolute lows.
Why did clean-energy stocks fall so far?
Several pressures affected the sector simultaneously.
Higher interest rates
Renewable-energy projects frequently require considerable upfront capital, while their cash flows arrive over many years.
Higher interest rates increase:
- project-financing expenses;
- the cost of refinancing debt;
- required returns from investors;
- discount rates applied to future cash flows;
- competition from bonds and other income-producing assets.
These effects can be particularly damaging to companies whose valuations depend heavily on profits expected far into the future.
Excessive valuations in 2020
Clean-energy shares benefited from exceptionally strong investor enthusiasm during 2020. Expectations surrounding decarbonisation, stimulus spending and government support pushed many stocks to valuations that assumed near-perfect future growth.
When earnings failed to match those expectations, valuations contracted.
A company can continue increasing revenue while its share price falls if investors previously paid too much for that growth.
Supply-chain inflation
Wind and solar developers faced higher costs for:
- steel;
- copper;
- specialised vessels;
- turbines;
- transformers;
- labour;
- transport;
- grid connections.
Some projects had been agreed under fixed-price contracts that did not adequately compensate developers or manufacturers for inflation.
Falling equipment prices
Lower solar-module and battery prices can accelerate clean-energy deployment. They are not necessarily positive for every listed manufacturer.
Rapid price reductions can compress margins, particularly when producers face surplus manufacturing capacity. The end customer benefits from cheaper technology while shareholders in the equipment supplier may experience weaker profitability.
Policy uncertainty
Clean-energy businesses remain sensitive to:
- tax credits;
- subsidies;
- auction rules;
- import tariffs;
- local-content requirements;
- environmental permits;
- grid policy;
- government changes.
A modification to national energy policy can materially alter the economics of projects or technologies.
Grid constraints
Installing renewable capacity is only part of the energy transition. Electricity networks must connect new projects, transport power between regions and balance intermittent generation.
Long connection queues and insufficient grid investment can delay projects even when demand for renewable electricity remains strong.
The structural growth case remains intact
The market correction did not stop renewable-energy deployment.
IRENA reported that worldwide renewable capacity reached 5,149 GW at the end of 2025 after its largest annual increase on record. Renewables represented approximately 49% of global installed generating capacity. IRENA
The International Energy Agency expects almost 4,600 GW of renewable capacity to be added between 2025 and 2030—twice the deployment achieved during the preceding five-year period. Solar is expected to represent nearly 80% of that expansion. IEA Renewables 2025
Long-term demand is supported by:
- electrification of transport and industry;
- growing electricity consumption from data centres;
- energy-security objectives;
- falling solar and battery costs;
- corporate renewable-power contracts;
- grid modernisation;
- replacement of ageing power infrastructure;
- government decarbonisation targets.
Nevertheless, rising demand for clean electricity does not guarantee that every clean-energy company—or every clean-energy ETF—will outperform.
Best clean-energy UCITS ETFs to consider
There is no universally “best” clean-energy ETF. The appropriate choice depends on whether an investor prioritises fund size, diversification, accumulation, lower fees or exposure to smaller technology companies.
| ETF | ISIN | Income | Ongoing fee | Approximate holdings | Main characteristic |
| iShares Global Clean Energy Transition UCITS ETF | IE00B1XNHC34 | Distributing | 0.65% | 106 | Large, established fund |
| iShares Global Clean Energy Transition UCITS ETF Acc | IE000U58J0M1 | Accumulating | Check latest KID | Around 100 | Accumulating version of broad S&P strategy |
| L&G Clean Energy UCITS ETF | IE00BK5BCH80 | Accumulating | 0.49% | Broad portfolio | Lower-fee diversified alternative |
| Invesco Global Clean Energy UCITS ETF Acc | IE00BLRB0242 | Accumulating | 0.60% | 110 | Greater exposure to smaller innovators |
Fund data can change. Investors should confirm the latest KID, availability, fee, holdings and Belgian tax treatment before trading.
1. iShares Global Clean Energy Transition UCITS ETF
Best for: fund scale, liquidity and an established operating history.
This iShares ETF tracks the S&P Global Clean Energy Transition Index, which targets approximately 100 companies from developed and emerging markets involved in clean-energy-related businesses. S&P Dow Jones Indices
As of 30 June 2026, the distributing share class reported:
- 106 holdings;
- a 0.65% total expense ratio;
- approximately $4.17 billion in total fund assets;
- physical replication;
- Irish domicile;
- semi-annual distributions;
- a price-to-earnings ratio of 19.14;
- a 0.90% trailing yield.
Its long history and large asset base distinguish it from many newer thematic ETFs.
The fund is not equally weighted. Its ten largest positions represented 54.79% of the portfolio in June 2026, while Bloom Energy alone represented 14.76%. First Solar and NextPower were also major positions.
This concentration can magnify gains when leading holdings perform well, but it creates meaningful single-company risk.
Advantages
- One of Europe’s largest clean-energy ETFs;
- Long operating history;
- Exposure to developed and emerging markets;
- More than 100 holdings;
- Multiple European listings;
- Both distributing and accumulating share classes available.
Disadvantages
- Relatively high 0.65% fee;
- Significant concentration in the largest holdings;
- Volatile performance;
- Distributing version may be less convenient for investors seeking automatic reinvestment;
- Currency exposure remains relevant despite euro-denominated listings.
Verdict
The iShares fund is the strongest all-round choice for investors prioritising size and operating history. Its concentration means it is broader in name than it may initially appear, however.
2. L&G Clean Energy UCITS ETF
Best for: a balance between diversification and cost.
The L&G Clean Energy UCITS ETF tracks the Solactive Clean Energy Index NTR. It provides exposure to companies involved in renewable-power generation and clean-energy technologies.
Its 0.49% TER is lower than the fees charged by the iShares and Invesco funds examined here. L&G’s official fund page identifies the fund’s benchmark and current TER.
The ETF uses an accumulating structure, meaning that portfolio income is retained and reinvested rather than paid to shareholders.
Its methodology seeks exposure across the clean-energy value chain, which can include:
- renewable electricity producers;
- wind and solar equipment;
- batteries;
- energy storage;
- grid technology;
- energy-management systems;
- supporting components.
Advantages
- Lower fee than several major competitors;
- Accumulating structure;
- Broad clean-energy value-chain exposure;
- Irish domicile;
- Suitable for long-term investors who do not require income.
Disadvantages
- Smaller than the leading iShares fund;
- Still considerably more expensive than broad-market ETFs;
- Thematic and policy risks remain substantial;
- Index methodology can produce exposure to companies whose connection to clean energy varies.
Verdict
For investors seeking a diversified accumulating clean-energy ETF at a relatively competitive fee, L&G presents one of the most balanced UCITS options.
3. Invesco Global Clean Energy UCITS ETF Acc
Best for: diversified exposure to smaller clean-technology innovators.
The Invesco fund tracks the WilderHill New Energy Global Innovation Index. Its mandate extends beyond renewable-power producers to companies involved in:
- storage;
- energy efficiency;
- conversion technologies;
- cleaner transport;
- pollution control;
- hydrogen and fuel cells;
- advanced electrical equipment;
- carbon reduction.
As of 30 June 2026, the fund reported:
- 110 holdings;
- a 0.60% ongoing charge;
- approximately $148.45 million in assets;
- physical replication;
- Irish domicile;
- accumulating income;
- quarterly index rebalancing.
The portfolio was more evenly distributed than the iShares fund. Its largest individual position represented only 1.53%, while the ten largest holdings each accounted for close to 1%–1.5%.
Geographically, 24.3% of the portfolio was allocated to the United States, followed by Taiwan at 15.1%, China at 12.2% and South Korea at 7%. Industrials represented 47.3% of assets. Invesco’s June 2026 factsheet
This structure provides extensive diversification by company but introduces greater exposure to small-cap stocks, emerging markets and less-established technologies.
Advantages
- Very broad technology coverage;
- Low individual-company concentration;
- Accumulating structure;
- Significant exposure to Asian clean-technology supply chains;
- Access to smaller innovative companies.
Disadvantages
- Higher small-cap and emerging-market risk;
- Smaller fund size;
- 0.60% ongoing charge;
- Potentially wider bid-ask spreads;
- Considerable sensitivity to technology cycles and policy changes.
The fund gained 56.77% during the 12 months to June 2026 but remained down 31.75% over five years. Since its March 2021 launch, it had lost 39.61% in USD.
Verdict
Invesco offers the most diversified company weights and the greatest exposure to emerging clean-energy technologies. It may also be the most speculative of the three principal choices.
Which ETF appears most attractive?
| Investor priority | Potentially most suitable ETF |
| Largest and most established fund | iShares Global Clean Energy Transition |
| Accumulation and relatively lower fee | L&G Clean Energy |
| Broad innovation exposure | Invesco Global Clean Energy |
| Lower single-stock concentration | Invesco Global Clean Energy |
| Longest track record | iShares Global Clean Energy Transition |
| Regular cash distributions | iShares distributing share class |
| Long-term automatic reinvestment | L&G or accumulating iShares/Invesco share class |
For a typical European investor seeking a modest satellite allocation, the L&G Clean Energy UCITS ETF arguably provides the best balance between cost, diversification and accumulation.
The iShares Global Clean Energy Transition UCITS ETF remains the strongest choice for scale and history, while the Invesco fund is better suited to investors deliberately seeking a broader and more speculative portfolio of clean-technology innovators.
These conclusions are based on fund structure rather than predictions about which ETF will deliver the highest future return.
Has the opportunity already passed after the rebound?
The answer is not straightforward.
The sector’s 2021–2024 correction removed much of the valuation excess created during 2020. However, the 2025 and early-2026 rebound has already rewarded investors who purchased near the lows.
The iShares fund’s 58.14% return over the 12 months to June 2026 and the Invesco fund’s 56.77% gain demonstrate that clean-energy shares are no longer universally depressed.
Investors should therefore avoid relying on the correction alone as a reason to buy.
More relevant questions include:
- Are current valuations supported by expected earnings?
- Can portfolio companies generate positive free cash flow?
- How much debt do they carry?
- Are margins improving?
- How dependent are they on subsidies?
- Does the ETF hold profitable operators or mainly speculative manufacturers?
- How concentrated is it in one technology or company?
- Can the allocation tolerate another decline of 30%–50%?
A sector can remain below its historic peak while still becoming expensive after a sharp rally.
Major risks after the correction
Interest-rate sensitivity
Clean-energy companies remain capital intensive. Persistently high borrowing costs could continue to constrain project economics and equity valuations.
Political and regulatory risk
Changes to subsidies, tariffs, permitting rules or emissions policies can rapidly alter expected profitability.
Chinese manufacturing competition
Chinese producers have helped reduce the cost of solar panels, batteries and other equipment. This benefits deployment but can pressure the margins of manufacturers elsewhere.
Technology risk
The future winners across hydrogen, storage, offshore wind and grid technology remain uncertain. Some technologies may fail to achieve commercial scale.
Concentration risk
A thematic ETF can own 100 companies and still be highly concentrated in one economic trend. Holdings may respond similarly to interest rates, policy changes and industry pricing.
Currency risk
A clean-energy ETF traded in euros is not necessarily currency hedged. European investors can remain exposed to the dollar, renminbi, yen and other currencies through the underlying holdings.
Fund closure risk
Smaller thematic ETFs can be closed if assets and fee revenue remain insufficient. Investors normally receive the remaining net asset value, but closure can create inconvenience, transaction costs and possible tax consequences.
How much should investors allocate?
Clean-energy ETFs are generally better suited to a satellite position than to the core of a portfolio.
A broad global equity ETF already holds utilities, industrial companies, semiconductor manufacturers and other businesses benefiting from electrification. A specialist ETF creates an additional overweight towards one theme.
A possible structure could be:
- 90%–95% diversified core investments;
- 5%–10% clean-energy thematic allocation.
More cautious investors may use an allocation below 5%. The appropriate percentage depends on risk tolerance, time horizon, existing holdings and financial circumstances.
Investors should assume that a clean-energy ETF can underperform the global equity market for several consecutive years.
What Belgian investors should verify
Belgian investors should examine more than the ETF’s commercial name and performance chart.
Important details include:
- Exact ISIN;
- Fund domicile;
- Belgian registration status;
- Applicable stock-exchange transaction tax;
- Accumulating or distributing structure;
- Taxation of distributions;
- Potential capital-gains taxation;
- Broker commission and currency-conversion costs;
- Exchange liquidity and bid-ask spread;
- Whether the broker handles Belgian tax obligations.
The accumulating and distributing versions of the same strategy can have different ISINs and potentially different Belgian tax treatment.
Investors should verify the position of the precise share class with their broker or tax adviser before purchasing.
Final verdict
The clean-energy sector’s correction created more reasonable valuations and eliminated part of the speculative excess that followed the 2020 rally. At the same time, record renewable-capacity additions and forecasts for continued expansion confirm that the underlying energy transition remains powerful.
The sector’s strong recovery since 2025 means investors should no longer assume that every clean-energy stock is cheap.
Among the principal UCITS choices:
- L&G Clean Energy UCITS ETF offers the most attractive overall balance of cost, diversification and automatic reinvestment;
- iShares Global Clean Energy Transition UCITS ETF is the leading choice for scale, liquidity and operating history;
- Invesco Global Clean Energy UCITS ETF provides the broadest exposure to smaller innovators but carries higher speculative risk.
The correction may have improved the sector’s long-term risk-reward profile. It has not transformed clean-energy ETFs into low-risk investments.
A clean-energy ETF should normally complement a diversified portfolio rather than replace it. Investors should select the fund based on index construction, holdings, concentration and costs—not simply because the sector remains below its former peak.
This article is provided for informational purposes only and does not constitute personalised investment, tax or legal advice. ETF performance, holdings, fees and tax treatment can change. Investors should review the latest prospectus and Key Information Document before investing.
Sources: IRENA—Renewable Capacity Statistics 2026, IEA—Renewables 2025, S&P Global Clean Energy Transition Index, iShares Global Clean Energy Transition UCITS ETF, L&G Clean Energy UCITS ETF, Invesco Global Clean Energy UCITS ETF
