Beyond ESG: How to Invest in the Real Energy Revolution? A Fresh Look at the ICLN ETF (ft. Iberdrola)

Interested in “doing good” with your money in a bull market? Want to bet on a real transformation of the energy industry? Let’s take another look at the iShares Global Clean Energy ETF.

Over the past few years, ESG (environmental, social, and governance) has become a major theme in the investment market. As interest in the environmental (E) pillar has grown, many clean-energy-related ETFs have drawn investors’ attention. But we still need to examine carefully whether these ETFs truly capture innovation in the energy industry and whether they can deliver tangible returns for investors.

The ETF we are revisiting today is the iShares Global Clean Energy ETF (ICLN). In a previous article, we covered the ETF’s basic profile and focused on Enphase Energy, one of its key holdings. This time, we will move beyond the somewhat abstract ESG theme and analyze the ICLN ETF in depth from the broader perspective of structural change across the entire energy industry.

At first glance, the iShares Global Clean Energy ETF (ICLN) appears to invest in companies that pursue clean and sustainable energy. But we need to look a bit more closely at what this ETF actually holds.

Key characteristics:

The ICLN ETF clearly reflects the important trend of clean energy. But from an investor’s standpoint, we need to ask whether this ETF is an effective way to bet on the fundamental transformation of the energy industry.

1. The complexity of the energy transition: The energy industry is not simply about “switching” from fossil fuels to renewables. It is an extremely complex space where factors such as energy security, economics, technological progress, and infrastructure build-out all interact. The ICLN ETF focuses primarily on renewable power producers, but companies in other essential areas of the transition—such as energy storage technologies, grid management, and carbon capture—may have relatively low weights. In particular, when we look at the current top holdings, we see a heavy tilt toward large European utilities and wind and solar power companies.

2. The gap between “green” labels and reality: Not all companies held by the ICLN ETF necessarily engage only in genuinely “green” activities. For example, the production of solar panels can cause environmental pollution, and the construction of wind farms can damage local ecosystems. Investors therefore shouldn’t blindly accept the ETF’s “green” label; instead, they should dig deeper into each company’s business model and its actual environmental impact.

3. Intermittency of renewables and the need for energy storage solutions: Renewable sources such as solar and wind have a fundamental limitation: their output is highly variable, depending on external conditions like weather and time of day. To solve this intermittency problem and ensure a stable energy supply, the development and deployment of energy storage systems (ESS) is essential. Because the ICLN ETF is heavily concentrated in renewable power producers, its exposure to companies focused on energy storage technologies may be limited. Investors should therefore consider not only the growth potential of renewables, but also the importance of advances in storage technologies.

Here is how overseas experts view clean energy and the ICLN ETF.

According to analysis by Bloomberg New Energy Finance (BloombergNEF),

highlighting the strong growth trajectory of the green energy market.
However, the financial website Investopedia describes the ICLN ETF as

underscoring the importance of policy changes.

The iShares Global Clean Energy ETF (ICLN) is a solid way to gain exposure to the critical future growth theme of clean energy. In particular, it offers broad investment in major European energy companies as well as global wind and solar firms. However, there are many factors investors need to consider, including changes in government policy, intensifying technological competition, the potential emergence of new energy sources, and the diverse country-specific risks that come with global investing.

Therefore, before investing in the ICLN ETF, you need a deep understanding of the overall clean energy industry, along with ongoing attention to the competitiveness of the specific sectors and companies the ETF invests in, and to shifts in global market conditions. Rather than simply riding the ESG trend, investment decisions should be based on objective analysis and careful judgment.