Methodology Field Guide

Clean-Energy ETFs Compared: How Six Funds Are Actually Built

Six ETFs sit on the same shelf, all called "clean energy," and almost no two of them hold the same stocks.

That's not a marketing problem. It's a methodology problem. Each fund's index defines "clean energy" differently, weights its constituents differently, and rebalances on a different clock. If you don't know the rulebook, you don't know what you own.

So here's the rulebook for the six largest clean-energy ETFs in the US market, plus where Climate50 sits in the same landscape. No rankings. No picks. Just the construction.

Six funds. Six rulebooks.

ICLN (iShares Global Clean Energy). Around 100 holdings, global, modified market-cap, single-name cap near 4.5%, semiannual reconstitution. Tracks the S&P Global Clean Energy Index. In 2021 it expanded from 30 holdings to about 100 after liquidity strain forced a rewrite of the underlying index. That's proof an index methodology is a live document, not a stone tablet.

QCLN (First Trust NASDAQ Clean Edge Green Energy). Around 60 holdings, US-focused, modified market-cap, quarterly rebalance. The Clean Edge universe is broader than ICLN's; it picks up EV adjacencies and storage names that the global index often misses.

TAN (Invesco Solar). Solar pure-play. Around 40 holdings, modified market-cap, quarterly rebalance. If you own TAN, you own the solar value chain: panels, inverters, installers, polysilicon. Nothing else.

FAN (First Trust Global Wind Energy). Wind pure-play, but with a twist. The underlying index splits its weight roughly 60/40 between pure-play wind companies and diversified industrials with wind exposure. So FAN is partly diluted by names like Siemens and General Electric, on purpose.

PBW (Invesco WilderHill Clean Energy). Tiered weighting that tilts small. Around 70 holdings, US small- and mid-cap exposure, quarterly rebalance. A $300M battery startup can carry meaningful weight next to a $40B utility. That's a deliberate choice, not a flaw.

ACES (ALPS Clean Energy). North American only, meaning US and Canada. Around 50 holdings, modified market-cap, quarterly rebalance. It excludes the European wind giants and Asian solar manufacturers that dominate the top of ICLN.

Selection?

Every one of these indexes starts with the same question. What counts as "clean energy"? Every one of them answers it differently.

ICLN uses an S&P Global Clean Energy score that blends business activity with an environmental-impact filter. QCLN requires a company to be classified as "clean energy" by Clean Edge's own taxonomy. TAN requires solar revenue exposure above a threshold; FAN does the same for wind. PBW uses the WilderHill screen, where companies must derive a meaningful portion of revenue or activity from clean-energy themes.

Climate50 uses a revenue-purity test across eight named sectors. If a company's core business model doesn't materially depend on the climate transition, it doesn't qualify. There's no partial credit for "we use solar in our offices."

The screens look similar from a distance. Up close, they exclude very different companies for very different reasons.

Weighting?

This is where the funds diverge most.

Modified market-cap (ICLN, QCLN, TAN, FAN, ACES, Climate50) means the biggest companies get the biggest weights, but with caps so a single name can't dominate. The cap matters. ICLN caps single names near 4.5%; Climate50 caps at 8%; QCLN sits closer to 8% as well. A tighter cap forces more diversification; a looser cap lets winners run.

Tiered weighting (PBW) throws the pure cap-weighted logic out. Companies are sorted into tiers by purity and relevance, then weighted within those tiers. The result tilts toward small caps and produces more turnover, full stop.

There's no right answer here. Each weighting scheme answers a different question.

Rebalance?

Quarterly (QCLN, TAN, FAN, PBW, ACES, Climate50) means the index re-snaps weights four times a year. Semiannual reconstitution (ICLN, Climate50) means the actual list of holdings only changes twice a year. Rebalance moves weights. Reconstitution moves the roster.

A faster rebalance reacts faster to price moves but generates more turnover. A slower one is calmer but can drift further from its target weights between dates. Neither is "better"; they answer different questions about how often a benchmark should re-anchor.

Where does Climate50 fit?

Climate50 is a published index, not an investable product. So it's not on the shelf next to these six. But it's built from the same kinds of choices: 50 constituents, modified market-cap weighting, an 8% single-name cap, quarterly rebalance, semiannual reconstitution, and eight named climate sectors.

Two design choices set it apart. First, the eligibility net is wider than ICLN's or TAN's. It covers grid, water, materials, and circular-economy names that pure clean-energy indexes leave out. Second, the rulebook is published in full on this site. You don't need a Bloomberg terminal to read it. You need a browser.

So what?

You can't compare ETFs by ticker alone. You compare them by rulebook. ICLN and PBW both say "clean energy" on the tin and end up in radically different places. Global mega-caps versus US small-caps. Market-cap versus tiered weighting. Narrow screen versus broad screen.

If you're trying to understand what a fund actually holds, the methodology document is the only thing that tells you. Read it. Then read the next one. Then come back to this page and read ours.

That's not investment advice. That's literacy.

This article describes index construction methodology only. It is not investment advice and is not a recommendation to buy or sell any security or fund. Climate50 is a published index, not an investable product. Holding counts, single-name caps, and rebalance schedules are accurate to the best of our knowledge as of publication; consult each fund's prospectus for current details.