Clean Energy ETFs Jump

Renewable energy ETFs have taken in double-digit returns in the past several trading sessions as European powers accelerate their efforts to phase out reliance on Russian fossil fuels. 

European Union leaders earlier in the week released a draft statement to start phasing out purchases of Russian oil, coal and natural gas, but have yet to set a specific target year for the bloc. Germany is also reportedly aiming to generate all of its electricity needs with renewable power by 2035. 

The United Kingdom has already declared that it will phase out buying Russian oil by the end of the year, joining the U.S.’ immediate ban on Russian fossil fuel imports, and is in the process of banning natural gas imports as well. 

The proposed acceleration away from Russia’s prime export gave several renewable energy ETFs double-digit returns in the past week, according to ETFLogic data.  

The Invesco Solar ETF (TAN) and the Global X Hydrogen ETF (HYDR) both notched returns just below 12.5% in the last seven days, while the Defiance Next Gen H2 ETF (HDRO) and the ProShares S&P Kensho Cleantech ETF (CTEX) posted returns above 10.5%. 

Two carbon credits ETFs also gained more than 9% in the past few days despite diving earlier in the month on fears of a recession in Europe. The KraneShares European Carbon Allowance Strategy ETF (KEUA) and the iPath Series B Carbon ETN (GRN) returned 9.84% and 9.37%, respectively, in the past week. 

Although the segment is enjoying a short-term gain, renewable energy in general has had a difficult 12 months, as supply chain issues and the prospect of multiple rate hikes from the Fed created a sour sentiment in comparison to the positive long-term potential of the ESG boom and a cut of the $1 trillion infrastructure bill signed into law last year. 

The five largest gainers in the segment this week are all net losers over the past 12 months, with all but the Fidelity Clean Energy ETF (FRNW) suffering more than double-digit losses. 

Courtesy StockCharts

Richard Wolfe, an equities analyst covering renewables at CFRA Securities, said the last key portion of the industry’s longer-term direction is whether the U.S. will pass supportive tax policy and additional spending. 

“I think a more favorable tail wind would come from some of the expected spending or investments in clean energy that would have been in the Build Back Better framework,” he said.  

Contact Dan Mika at [email protected], and follow him on Twitter