Karee Venema
Thematic green exchange-traded funds (ETFs) and mutual funds allow you to zero in on a specific area of the fight against climate change, from electric-vehicle batteries to solar power.
These funds deliver the benefit of diversification and can hold shares in burgeoning companies that you might feel uncomfortable buying on your own because they have no profits and short histories as publicly traded stocks.
What's more, a lot of leading sustainable companies are based overseas – so you may not be able to buy shares in them, but these green funds can. Let's take a closer look.
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KraneShares Electric Vehicle and Future Mobility ETF
The KraneShares Electric Vehicle and Future Mobility ETF (KARS) is a green ETF that tracks a global index that includes companies throughout the EV ecosystem – from auto and battery makers to autonomous driving technology (sensors), charging stations and raw materials.
KARS owns shares in several EV battery makers, including Contemporary Amperex Technology, better known as CATL, the world's largest lithium battery maker; its shares trade only in China. Other holdings include BYD – a Chinese EV maker backed by Warren Buffett's Berkshire Hathaway (BRK.B) – and lithium stock Albemarle (ALB).
The fund has struggled in recent years amid weakening demand for EVs, but expectations are for the electric vehicle market to grow by leaps and bounds over the next several years which could create tailwinds for KARS. According to Statista, the global EV market, is forecast to hit 18 million vehicles by 2026 vs 10.8 million in 2023.
Given KARS remains a highly volatile green ETF (as many of the funds featured here are), investors would be wise to approach it with extreme caution and due diligence.
Learn more about KARS at the KraneShares provider site.
Global X Lithium & Battery Tech ETF
Battery manufacturing must increase dramatically (some estimates say by 80-fold) if electric vehicle sales are to progress as expected.
The Global X Lithium & Battery Tech ETF (LIT) tracks an index of lithium mining and refining companies and battery makers around the world.
U.S. lithium firm Albemarle, as well as BYD and TDK (TTDKY), a Japanese electronics company, are top holdings. Expect high volatility. However, the fund boasts a solid five-year average annualized return of 10.9%.
Learn more about LIT at the Global X provider site.
Invesco WilderHill Clean Energy ETF
Invesco WilderHill Clean Energy ETF (PBW) covers a range of renewable-energy sources – wind, solar, hydro, geothermal and biofuel – and clean-energy tech.
Top holdings at present include PV solar module maker First Solar (FSLR) and rare earth materials miner MP Materials (MP).
Morningstar gives the green ETF a Neutral rating, saying that while fees are relatively low and experience among the management team is "abundant," the fund's "strategy has been a rocky, volatile ride for investors."
Indeed, PBW has been clobbered over the past year, down 43%.
Learn more about PBW at the Invesco provider site.
Fidelity Climate Action
Fidelity Climate Action Fund (FCAEX) is an intriguing option for climate-focused investors. Asher Anolic runs this relatively new, actively managed green mutual fund, which launched in June 2021.
It invests in global companies that work to address climate change (or its impacts) through corporate strategies or by providing technology, services or products.
Microsoft (MSFT), Alphabet (GOOGL) and Nvidia (NVDA) are among FCAEX's top holdings. Given the strength of these Magnificent 7 stocks over the past 12 months, the fund boasts a one-year return of 24%.
Learn more about FCAEX at the Fidelity provider site.
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