ICLN's 10.7% annualized return over a decade beats XLE's 8.9%. But the oil fund charges lower fees, yields more, and has rallied on war-driven crude prices.
The choice between a traditional energy ETF and a clean energy fund comes down to time horizon and conviction on the macro trend. Over the past decade, the clean energy bet has won.
iShares Global Clean Energy ETF (ICLN) delivered annualized returns of 10.7% over 10 years, beating the State Street Energy Select Sector SPDR ETF (XLE) at 8.9%. The fossil-fuel fund has the edge on fees and income. XLE charges 0.08% in expenses, nearly five times less than ICLN's 0.39%, and yields 2.60% versus ICLN's 1.00%. But the clean energy basket has outperformed on a total-return basis over the long stretch.
The shorter-term picture flips. Over five years, ICLN lost about 1%, reflecting the sector's sensitivity to rising interest rates and trade tariffs. In the past three months, ICLN is up 13% while XLE has lost 13%, as crude prices have pulled back from war-driven highs.
The two funds are structurally different. XLE holds 21 companies, all in U.S. oil, natural gas, and consumable fuels. Its top three positions are ExxonMobil at 20.3% of assets, Chevron (CVX) at 14.4%, and ConocoPhillips (COP) at 5.9%. Roughly three-quarters of the fund sits in its top 10 holdings. Launched in 1998, it tracks the Energy Select Sector Index.
ICLN holds 105 names across technology (34% of the fund), utilities (33%), and industrials (31%). Its largest positions are Bloom Energy (BE) at 14.8%, First Solar (FSLR) at 8.4%, and Nextpower (NXP) at 7.3%. About 23% of the fund is in small-cap stocks, 39% in mid-caps, and the balance in large caps. Geographically, 40% is in U.S. businesses, 29% in emerging Asian markets, and the rest across developed and other emerging markets.
Solar and wind are now the cheapest and second-cheapest ways to produce utility-scale electricity, according to investment bank Lazard. That cost advantage underpins the long-term case for clean energy. U.S. oil and gas stocks benefit from elevated prices tied to the Iran conflict, which supports near-term income for XLE holders.
For an investor who can ride the near-term volatility in renewables, ICLN offers exposure to a structural shift in power generation. The fund's 10-year track record backs that thesis.
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