ICLN: Clean Energy ETFs vs Trump’s ‘Liquid Gold’
On day one, Trump declares national energy emergency, withdraws from Paris Climate Agreement.
Clean energy exchange-traded funds, led by the iShares Global Clean Energy ETF (ICLN), were under pressure Tuesday as President Donald Trump's energy policy strongly favors the expansion of fossil fuels, particularly oil and natural gas while deprioritizing clean energy initiatives.
On his first day back in office, Trump declared a national energy emergency to expedite oil and gas production, lifted restrictions on drilling in areas like Alaska, and withdrew the U.S. from the Paris Climate Agreement.
Additionally, he suspended new federal offshore wind leasing and revoked previous electric vehicle targets.
These actions, which underscore his commitment to traditional energy sources over renewable energy development, pushed clean energy ETFs like ICLN down 1% yesterday.
ICLN, Renewable Energy ETFs’ Underperformance
Clean energy stocks and ETFs like ICLN have underperformed in recent years due to a combination of factors, including rising interest rates, which make growth-oriented investments less attractive; supply chain disruptions that increased costs for renewable energy projects; reduced government subsidies in certain regions; and heightened competition, which pressured margins for many clean energy companies.
Additionally, overvaluation from earlier enthusiasm about the sector led to a correction as expectations normalized. For example, ICLN, the largest renewable energy ETF with $1.4 billion in assets, hasn’t had a positive year since 2020, when the clean energy leader jumped more than 120%. ICLN declined 25% in 2024 while the broader market was up nearly 25%, as measured by the SPDR S&P 500 ETF Trust (SPY).
Trump’s ‘Drill Baby, Drill’ and ‘Liquid Gold’
As markets look forward to 2025 with a new administration in the energy policy driver’s seat, renewable and alternative energy may add a fifth consecutive down year with Trump’s eye on traditional energy sources like oil and gas and the abandonment of the Paris Climate Agreement.
One of the many post-inauguration executive orders signed by President Trump included a declaration of a “national energy emergency” to help combat inflation hailing “drill baby, drill” and claiming “We will be a rich nation again, and it is that liquid gold under our feet that will help to do it,” he said in his inauguration address to the nation.
While oil and traditional energy ETFs like the United States Oil (USO) and the Energy Select Sector SPDR ETF (XLE) have been top performers in 2025, with gains of more than 9% each year-to-date before the inauguration, both funds were down 1.7% and 0.5%, respectively, Tuesday as Middle East tensions cool and Trump’s energy initiatives fuel concerns over higher supplies.