This Clean Energy ETF Is Not Clean

ETFs, or Exchange Traded Funds are excellent ways to gain broad exposure in asset classes.  You can find ETFs for almost anything – currencies, commodities, and any class of stocks or bonds you can imagine.

There are many ETFs now for sustainable energy companies. The most popular is iShares Global Clean Energy ETF.  They claim to track the clean energy sector but they could just as easily be called a fossil fuel ETF.

Unfortunately, as of December 2020, the ECLN holdings appear to be made up of mostly fossil fuel exposure and dinosaur energy companies with little hope of being the future of clean energy.

Their top holdings all have major fossil fuel exposure.  Really, this thing border false advertisement as far as we’re concerned.

Note: This is not investment advice.  Any investment entails a risk of loss.  Talk to a professional!

ECLN Holdings as of November 2020

NextEra Energy Partners LLP and NextEra Energy

These NextEra stocks make up almost 15 percent of the entire ETF, which itself is an enormous concentration risk for a diversified ETF.  Worse, NextEra owns natural gas infrastructure in Pennsylvania and Texas.  These pipelines are not only a moral hazard but a financial liability until 2026 for NextEra Energy Partners

NextEra are the kings of greenwashing natural gas.  If they were truly committed to making sure our growing power demand is met “in the most environmentally responsible matter,” you don’t touch fossil fuels.  End of story.

To be fair, NextEra does own much more solar and wind assets, which appears to be why they made the ETF.  However, these fossil fuel assets just aren’t compatible with energy transition.  We want to see NextEra swap all fossil fuel assets for energy storage assets before classifying it as a clean energy play.

And really, there’s just no technology or interesting business practice here as far as we can tell.

Grade: D-  Stop Greenwashing and Live Up To Your Promise.  No More Fossil Fuels.

Sempra Energy

Sempra Energy is next most held stock in the iShares Clean Energy ETF (ECLN).  This is a wonderfully boring company that mostly builds grid infrastructure.  They will benefit from a shift to electric vehicles and distributed energy sources like wind, solar, and batteries, but they are also over-invested in fossil fuel infrastructure that threatens their future.

However, Sempra has a fossil side that you will own if you buy their stock.  In fact, Sempra owns pure play gas companies including SoCalGas.

Sempra has another massive liability and moral failure and have gambled their future on Liquid National Gas (LNG) facilities in Louisiana.  In the ultimate moral failure and bad long term business move –  Sempra even lobbies to stop the advancement of electrification and clean energy in order to keep their natural gas business from tanking.

Grade: D

TC PipeLines

We do appreciate that unlike NextEra and Sempra, TC PipeLines doesn’t pretend to be a renewable energy company.  This is a pure play fossil fuel dinosaur that needs to die for our children to have a habitable earth.

Natural gas is not clean.  It’s a fossil fuel that will kill us all if we don’t treat it as a necessary evil.  Do you want to invest in necessary evils or the future that will render them worthless?

Grade: F

Alliant Energy

I must say, ECLN is an epic disappointment so far.  How many of us have invested in this “Clean Energy ETF” not knowing it was a fossil fuel and mega utility ETF?

We are now at the 5th largest holding of ECLN with Alliant Energy Corp which consists of 4.43% of the ETF as of November 2020.  And boy is this another disappointment.

Clearly the world view of whoever put this ETF together is that climate change isn’t real, but the ‘greenies’ are on our backs so lets retire coal and look to a future of 100% natural gas until they realize they’re wrong.

Sorry for the tangent, but here we are with Alliant Energy Corp based in Madison, Wisconsin and historically it’s a dinosaur.  Sure, like every other utility they’re under pressure to retire coal plants so they’ve cleaned up to the extent they’ve been required to by their public utility commissions, the law, and their customers.

But is that the kind of energy transition we need?  Is that what’s going to get us where we’re going?

We doubt it.

Grade: C

Xcel Energy Inc

Do the bankers who put together this ETF realize that many of these companies are literally fighting clean energy adoption?  Xcel Energy has lobbyists and lawyers around the country that nip good ideas in the bud.  What Xcel did in Minnesota to the Community Solar Program is disgraceful.

Like Alliant Energy, Xcel is clean to the extent they have been forced to by law, and their public utility commissions.  They care about their survival, monopolies, and profits, and they will do ANYTHING to maintain them.  Do not be fooled into trusting or investing in this company or this greenwashing ETF.

Grade: F

PSEG: Public Service Enterprise Group

If you’re investing in ECLN to take advantage of new technologies and the future of energy, a company called the ‘Public Service Enterprise Group’ probably isn’t what comes to mind.

Indeed, the company is exactly as boring as it sounds and makes reliable (for now) income from state-granted monopolies that are not in the customers interest and should not exist.

There are actually interested startups in PSEG territory that have technology that could change the world, make energy less expensive, and empower everyone to buy and sell electricity seamlessly using blockchain.  Unfortunately, companies like PSEG make that impossible.

What monopoly utilities like Sempra, PSEG, and Xcel Energy do is lobby for the exclusive right to by the only company to sell electricity in a given area.  Instead, the infrastructure that these utilities operates needs to be considered a ‘commons’ and startups need to compete to balance the grid and provide solutions.

Unfortunately, 95% of the interested public companies that should be held on the ECLN ETF don’t even exist because monopoly utilities keep them from getting traction.

They find excuses to build massive infrastructure and rate base their customers to pay for it so they can make reliable profits for their shareholders.

Honestly, we came in with an open mind but we are almost 50% through the ECLN Holdings and it is becoming clear that this is a joke of a ETF if you want to help the planet.

Why would you invest in any of these companies when you are already forced to pay rent to them every month?  ECLN is not a clean energy ETF and needs to do better or shut it down.