Is Invesco Global Clean Energy ETF (PBD) a Strong ETF Right Now?

A smart beta exchange traded fund, the Invesco Global Clean Energy ETF (PBD) debuted on 06/13/2007, and offers broad exposure to the Alternative Energy ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

PBD is managed by Invesco, and this fund has amassed over $254.56 million, which makes it one of the average sized ETFs in the Alternative Energy ETFs. This particular fund, before fees and expenses, seeks to match the performance of the WilderHill New Energy Global Innovation Index.

The WilderHill New Energy Global Innovation Index is comprised of companies engaged in the business of the advancement of cleaner energy and conservation.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.75% for this ETF, which makes it one of the most expensive products in the space.

PBD's 12-month trailing dividend yield is 0.83%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Bloom Energy Corp (BE) accounts for about 1.19% of the fund's total assets, followed by Plug Power Inc (PLUG) and Sunpower Corp (SPWR).

Its top 10 holdings account for approximately 10.73% of PBD's total assets under management.

Performance and Risk

So far this year, PBD has lost about -20.73%, and is down about -43.61% in the last one year (as of 02/07/2022). During this past 52-week period, the fund has traded between $20.79 and $39.70.

The fund has a beta of 1.27 and standard deviation of 32.22% for the trailing three-year period, which makes PBD a high risk choice in this particular space. With about 139 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco Global Clean Energy ETF is a reasonable option for investors seeking to outperform the Alternative Energy ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7.53 billion in assets, iShares ESG Aware MSCI USA ETF has $24.68 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Alternative Energy ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.