Sector Analysis2025-09-26

Energy Transition Investment Boom: Clean Energy ETFs and Traditional Energy ETFs Rise Together

As the global energy transition accelerates, clean energy ETFs are gaining strength, while traditional energy ETFs are also being re-evaluated as legacy energy companies ramp up their transition investments. Strategies for incorporating the diverse investment opportunities within the energy sector into portfolios are drawing significant attention.

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As the global push to achieve carbon neutrality accelerates the energy transition, investment in the clean energy space is surging. The commercialization of renewable energy technologies—including solar, wind, battery, and hydrogen energy—is gaining full momentum, drawing considerable attention to clean energy ETFs. At the same time, traditional energy companies are actively investing in the energy transition, prompting a re-evaluation of the appeal of conventional energy ETFs. This makes it an opportune moment to adjust energy sector weightings using an asset allocation calculator.

Rapid Growth of the Solar and Wind Power Industries

Continuous advances in solar panel and wind turbine technology have driven renewable energy generation costs down to levels competitive with fossil fuels. Order backlogs at major renewable energy companies—including First Solar, Enphase, and Vestas—are at all-time highs, and ETFs such as ICLN (Clean Energy ETF) and PBW (Clean Energy ETF) are benefiting from this growth. Government green new deal policy support is expected to further strengthen the sector's growth momentum going forward.

Proliferation of EV Batteries and Charging Infrastructure

Alongside the explosive growth of the electric vehicle market, investment in battery technology and charging infrastructure is also surging. Improvements in lithium-ion battery energy density and falling prices have greatly enhanced the economics of electric vehicles, with companies like Tesla, BYD, and CATL leading battery technology innovation. Related ETFs such as LIT (Lithium & Battery ETF) are direct beneficiaries of this trend.

Hydrogen Energy and Next-Generation Clean Technologies

As hydrogen energy emerges as a key solution for long-term energy storage and industrial fuel, related investment is on the rise. Advances in green hydrogen production technology and improved fuel cell efficiency are making the hydrogen economy increasingly viable, and the growth potential of hydrogen-related companies such as Air Liquide, Linde, and Plug Power is drawing attention. Specialized ETFs like HJEN (Hydrogen ETF) provide investment exposure to this space.

Transition Investments by Traditional Energy Companies

As oil majors actively participate in the energy transition, the composition of existing energy ETFs is evolving. Major oil companies including Shell, BP, and TotalEnergies are investing billions of dollars in renewable energy businesses, and their portfolio diversification is enhancing the investment appeal of traditional energy ETFs such as XLE (Energy Sector ETF) and VDE (Energy ETF). Investment in transition technologies such as carbon capture and biofuels is also expanding.

Conclusion

The energy transition represents more than a simple trend—it signals a fundamental shift in the economic paradigm. New investment opportunities are being created across both clean and traditional energy, and investors should use a portfolio calculator to build a balanced investment strategy across the various sub-sectors of the energy sector. Use the rebalancing calculator to find the optimal allocation between energy transition themes and traditional energy assets.

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