Power Your Portfolio: Top 5 Low-Cost Green ETFs for Sustainable Long-Term Growth

The global movement towards sustainability is more than an environmental imperative; it represents a profound economic transformation that is unlocking significant investment opportunities. Investors are increasingly seeking avenues to align their financial objectives with their values, leading to a growing interest in “green” investments.

Green Exchange Traded Funds (ETFs) offer a convenient and diversified approach to participate in this evolving market. These funds specifically invest in companies that contribute to environmental sustainability, encompassing areas such as renewable energy generation, clean technology, and sustainable infrastructure, or those demonstrating robust environmental, social, and governance (ESG) practices with a strong environmental emphasis. By pooling investments across a basket of companies within the green sector, these ETFs provide immediate diversification, simplifying exposure to this dynamic market.

A crucial aspect for investors is to focus on “low-cost” options and understand the nuances of “long-term growth.” The expense ratio (ER) or total expense ratio (TER) represents the annual fee charged by the ETF provider. A lower fee ensures that a larger portion of the investor’s capital remains invested and compounds over time, directly enhancing net returns. This compounding effect is particularly impactful over extended investment horizons. While green sectors, particularly pure-play clean energy, have experienced periods of volatility and short-term underperformance , the underlying demand drivers—such as global policy mandates for decarbonization, continuous technological innovation, and increasing corporate and consumer commitment to sustainability—point to an undeniable long-term growth trajectory. This report aims to identify and analyze five top low-cost green ETFs, offering a detailed examination of their investment focus, key financial metrics, historical performance, and top holdings to guide informed decisions for long-term portfolios.

The appeal of green investing extends beyond purely financial returns. Many investors are motivated by a desire to contribute positively to environmental outcomes, aligning their capital with their personal values. This foundational commitment can provide a unique layer of support for the sector, as some investors may maintain their positions through market fluctuations, driven by ethical conviction rather than solely reacting to short-term profit shifts. This growing integration of ethical considerations into mainstream investment strategies highlights a positive trend for the sector’s resilience.

The prominence of expense ratios in financial data underscores their importance. A lower expense ratio directly translates to a higher proportion of the invested capital being retained by the investor, which then compounds over time. This seemingly small difference in annual fees can lead to substantial differences in total accumulated returns over decades. For instance, a fund with a 0.07% expense ratio will allow significantly more capital to compound than one with a 0.50% expense ratio over a 20-year period. Observing the expense ratios across various funds, it is evident that broader ESG and climate transition funds often feature ultra-low expense ratios, while more specialized or pure-play clean energy funds may have slightly higher, yet still competitive, fees. This trend suggests that as green investing becomes more widespread and encompasses broader market indices, the cost of access is generally decreasing, which is a favorable development for long-term investors.

Key Considerations When Choosing Green ETFs

Selecting the right green ETF requires a clear understanding of several critical factors that influence both cost and long-term potential.

Understanding Expense Ratios (ER/TER)

The Expense Ratio (ER) or Total Expense Ratio (TER) is the annual fee charged by the ETF provider as a percentage of the assets managed. This fee is a crucial consideration for long-term investors because it directly erodes investment returns over time. Even minor differences in expense ratios can lead to substantial variations in accumulated wealth over decades, due to the power of compounding. For example, the Xtrackers MSCI USA Climate Action Equity ETF (USCA) stands out with an exceptionally low expense ratio of 0.07%. This low fee structure is particularly attractive for investors committed to a long-term strategy, as it maximizes the amount of capital that remains invested and generates returns.

Defining “Green”: Clean Energy vs. Broader ESG

The term “green” in the context of ETFs can encompass a broad spectrum of investment approaches. For the purpose of this analysis, the focus is on funds with a direct and significant environmental impact.

• Pure-Play Clean Energy: These ETFs concentrate their investments in companies directly involved in the generation of renewable energy (such as solar, wind, hydro, geothermal, and bioenergy), electric vehicles, and advanced energy storage technologies. Examples include the iShares Global Clean Energy ETF (ICLN), Invesco Solar ETF (TAN), ALPS Clean Energy ETF (ACES), SPDR S&P Kensho Clean Power ETF (CNRG), and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN). These funds offer targeted exposure to companies at the forefront of the renewable energy transition.
• Climate Action/Transition: Funds in this category have a broader mandate, investing in companies across various sectors that are actively leading in climate transition, significantly reducing their carbon footprint, or aligning with global climate goals like the Paris Agreement. This can include large-cap companies not traditionally categorized as “clean energy” but making substantial environmental strides, such as many Amundi funds and the Xtrackers MSCI USA Climate Action Equity ETF (USCA).
• Broader ESG: These ETFs apply general environmental, social, and governance screens across a wide market index, such as the iShares ESG Aware MSCI USA ETF (ESGU) and Vanguard ESG U.S. Stock ETF (ESGV). While these funds promote sustainability, they may not offer the concentrated “green” exposure that some investors specifically seek, as their holdings might include companies with a notable carbon footprint if they are considered “best-in-class” within their respective sectors.

It is important for investors to look beyond a generic “green” label and delve into an ETF’s underlying index methodology and holdings to ensure alignment with their specific environmental investment goals. A broad ESG fund, for instance, might not satisfy an investor seeking purely “fossil-free” exposure. Understanding these distinctions is crucial for aligning investment choices with personal values and desired environmental impact.

Assessing Long-Term Growth Potential

Evaluating “long-term growth” involves more than just reviewing past performance, though historical data provides a vital track record. Investors should examine annualized returns over 3-year, 5-year, and 10-year periods (where available) to gauge consistency and resilience.

It is important to acknowledge the significant recent volatility and underperformance experienced by many clean energy ETFs over the past one to three years. Funds like ICLN, TAN, QCLN, ACES, and CNRG have shown negative returns in various recent periods. This volatility is often attributed to macroeconomic factors, fluctuations in energy prices, sensitivity to interest rates, and regulatory uncertainties. However, for true long-term investors, these periods of underperformance, which can lead to “discounted prices,” may present an attractive entry point. The strong secular tailwinds for renewable energy and climate solutions, driven by fundamental global shifts towards decarbonization, suggest a robust future for the sector. This perspective reframes short-term downturns as potential opportunities for future appreciation, emphasizing the importance of conviction in the long-term thematic trend rather than reacting to immediate market movements.

The apparent contradiction between recent negative performance and the pursuit of “long-term growth” in thematic green investments highlights the inherent cyclicality and high volatility characteristic of rapidly evolving sectors. The downturn observed over the past 1-3 years can be viewed as a market correction or a period of consolidation, rather than a negation of the long-term potential. For investors with a genuine long-term horizon (typically 5+ years), this period of lower valuations could represent a strategic buying opportunity. The fundamental growth drivers of the green economy, including policy support, technological advancements, and increasing global demand for sustainable solutions, remain strong. Therefore, setting realistic expectations regarding short-term performance and maintaining conviction in the overarching thematic trend are essential for those aiming for long-term capital appreciation in this sector.

Top 5 Low-Cost Green ETFs for Long-Term Growth

Here are five ETFs that align with the criteria of being low-cost, green-focused, and positioned for long-term growth, despite recent market fluctuations in some segments.

1. Xtrackers MSCI USA Climate Action Equity ETF (USCA)

• Overview:
  • Ticker: USCA
  • Expense Ratio: 0.07%
  • Net Assets: $2. billion (as of April 3, 2023)
  • Inception Date: April 3, 2023
  • Investment Objective: USCA seeks to track the performance of the MSCI USA Climate Action Index. This index comprises large and mid-capitalization U.S. companies identified as leaders in their respective Global Industry Classification Standard (GICS) sectors regarding climate transition efforts. The methodology aims for 50% coverage of companies from each GICS sector in the broader MSCI USA Index. It screens securities based on ESG research from MSCI, including climate change metrics and business involvement screening.
• Performance Analysis:
  • Given its recent inception in April 2023, long-term historical performance data for USCA is limited.
  • 1 Year Return (NAV): 9.24% (as of April 30, 2025)
  • 3 Month Return (NAV): -4.23% (as of April 30, 2025)
  • The fund’s short track record means it is too early to draw definitive conclusions based solely on performance. However, its low expense ratio and focus on climate action across a broad market index position it as a compelling option for long-term investors seeking diversified climate-aligned exposure.
• Key Holdings & Sector Exposure (as of May 8, 2025):
  • USCA holds 293 securities and is less top-heavy than many peers, with 34% of assets concentrated in its top 10 holdings.
  • Top Holdings: Microsoft Corp (5.62%), Apple Inc (4.74%), Amazon.com Inc (4.70%), NVIDIA Corp (4.37%), Meta Platforms Inc Class A (3.82%), Tesla Inc (2.84%), Alphabet Inc Class A (2.43%), Alphabet Inc Class C (2.08%), JPMorgan Chase & Co (2.10%), Visa Inc Class A (1.78%).
  • Sector Exposure: Information Technology (29.05%), Health Care (12.37%), Communication Services (12.10%), Consumer Discretionary (11.93%), Financials (11.08%), Consumer Staples (6.41%), Industrials (5.95%), Energy (3.99%), Utilities (2.33%), Materials (2.30%), Real Estate (2.29%). The portfolio is overweight in communication services and consumer cyclical compared to the category average, and underweight in industrials and technology.
• Why it stands out for long-term growth: USCA’s exceptionally low expense ratio of 0.07% makes it one of the most cost-efficient ways to gain exposure to climate-focused companies. Its strategy of targeting sector leaders in climate transition across large and mid-cap U.S. stocks provides broad diversification, aiming to capture growth from companies actively adapting to a low-carbon economy. While its inception is recent, its alignment with a robust climate action index and ultra-low fees make it a strong candidate for long-term sustainable growth within a diversified portfolio.

2. iShares Global Clean Energy ETF (ICLN)

• Overview:
  • Ticker: ICLN
  • Expense Ratio: 0.41%
  • Net Assets: $1. billion (as of May 14, 2025)
  • Inception Date: June 24, 2008
  • Investment Objective: ICLN seeks to track the investment results of an index composed of global equities in the clean energy sector, specifically focusing on companies involved in solar, wind, and other renewable energy sources. It provides physical exposure to its 98 underlying holdings.
• Performance Analysis (as of March 31, 2025):
  • 1 Year Return (NAV): -17.14%
  • 3 Year Return (NAV): -17.92%
  • 5 Year Return (NAV): 4.65%
  • 10 Year Return (NAV): 1.45%
  • Since Inception (NAV): -6.73%
  • ICLN has experienced significant negative returns over the past 1 and 3 years, reflecting a challenging environment for clean energy stocks due to energy price fluctuations, economic concerns, and regulatory uncertainty. However, its 5-year performance shows positive returns, indicating periods of recovery and growth.
• Key Holdings & Sector Exposure (as of May 14, 2025):
  • ICLN holds 101 companies.
  • Top Holdings: First Solar Inc. (6.42%), Vestas Wind Systems AS (6.19%), SSE PLC (5.79%), Iberdrola SA (5.48%), China Yangtze Power Co Ltd Class A (4.24%).
  • Sector Exposure: Utilities (55.90%), Technology (25.62%), Industrials (17.76%). This concentration in utilities and technology reflects its pure-play clean energy focus.
  • Geographic Breakdown: Non-U.S. Equity (71.99%), U.S. Equity (27.99%).
• Why it stands out for long-term growth: Despite recent underperformance, ICLN remains a prominent ETF in the clean energy space, offering diversified exposure to global companies specializing in renewable energy. Its long history since 2008 provides a track record through various market cycles. The fund’s direct focus on clean energy production and technology positions it to benefit significantly from the accelerating global transition to renewable sources. The current lower valuations, following recent market challenges, could represent a strategic entry point for investors with a long-term outlook who believe in the fundamental growth of the clean energy sector.

3. Vanguard ESG U.S. Stock ETF (ESGV)

• Overview:
  • Ticker: ESGV
  • Expense Ratio: 0.09%
  • Net Assets: $9. billion (as of April 30, 2025)
  • Inception Date: September 18, 2018
  • Investment Objective: ESGV seeks to track the performance of the FTSE US All Cap Choice Index, which screens for certain environmental, social, and corporate governance criteria. It explicitly excludes companies involved in controversial weapons, civilian firearms, nuclear power, fossil fuels (coal, oil, gas), tobacco, alcohol, gambling, and adult entertainment, and also screens for diversity and human/labor rights.
• Performance Analysis (NAV returns as of April 30, 2025):
  • 1 Year Return: 11.44%
  • 3 Year Return: 11.62%
  • 5 Year Return: 14.87%
  • Since Inception: 12.01%
  • ESGV has demonstrated strong positive performance across 1, 3, and 5-year periods, closely tracking the returns of top S&P 500 ETFs.
• Key Holdings & Sector Exposure (as of April 30, 2025):
  • ESGV holds over 1,300 U.S. stocks.
  • Top Holdings: Apple Inc (7.16%), Microsoft Corp (6.73%), NVIDIA Corp (5.83%), Amazon.com Inc (3.96%), Meta Platforms Inc Class A (2.75%), Alphabet Inc Class A (2.07%), Broadcom Inc (2.03%), Alphabet Inc Class C (1.85%), Tesla Inc (1.79%), Eli Lilly and Co (1.65%).
  • Sector Exposure: Technology (35.44%), Financial Services (14.46%), Healthcare (12.36%), Consumer Cyclical (12.32%), Communication Services (10.95%), Consumer Defensive (5.19%), Industrials (4.31%), Real Estate (3.16%), Basic Materials (1.60%), Utilities (0.22%), Energy (0.00%). The exclusion of fossil fuels is notable in its 0% energy sector exposure.
• Why it stands out for long-term growth: ESGV is an excellent choice for investors seeking broad U.S. market exposure with robust ESG screening, particularly its explicit exclusion of fossil fuels. Its exceptionally low expense ratio of 0.09% ensures minimal fee drag on long-term returns. The fund’s performance has been very similar to broader market indices, indicating that its ESG filters do not significantly hinder overall market-like returns. This makes ESGV a core holding option for those who prioritize both low cost and comprehensive environmental and social responsibility in their long-term growth strategy.

4. Amplify Etho Climate Leadership U.S. ETF (ETHO)

• Overview:
  • Ticker: ETHO
  • Expense Ratio: 0.45%
  • Net Assets: $154. million (as of May 16, 2025)
  • Inception Date: November 18, 2015
  • Investment Objective: ETHO is designed to track the Etho Climate Leadership Index – US, a broad-based index of U.S. companies identified as climate-efficient leaders with strong ESG alignment. It is notably the first diversified index ETF that is explicitly fossil-free, selecting equities based primarily on full-Scope 1-3 carbon footprint and overall ESG alignment. It also screens out tobacco, weapons, and gambling companies.
• Performance Analysis (NAV returns as of April 30, 2025):
  • 1 Year Return: -10.66%
  • 3 Year Return: -8.77%
  • 5 Year Return: 1.82%
  • Since Inception: 9.41%
  • ETHO has experienced negative returns over the past 1 and 3 years, similar to other clean energy funds, but shows positive returns over a 5-year period and since inception.
• Key Holdings & Sector Exposure (as of March 31, 2025):
  • ETHO holds 313 securities. Its assets are more dispersed than peers, with only 6.5% of the portfolio’s assets concentrated in the top 10 holdings.
  • Top Holdings: Sunrun Inc (0.63%), MYR Group Inc (0.45%), Boot Barn Holdings Inc (0.44%), Frontdoor Inc (0.43%), Cloudflare Inc (0.43%).
  • Sector Exposure: Information Technology (23.78%), Financials (19.63%), Health Care (13.91%), Industrials (12.99%), Consumer Discretionary (12.07%), Communication Services (5.71%), Consumer Staples (4.61%), Real Estate (3.17%), Materials (2.38%), Utilities (1.75%). The portfolio is overweight in technology and healthcare relative to the category average, and underweight in industrials and energy.
• Why it stands out for long-term growth: ETHO’s explicit fossil-free mandate and focus on climate leadership across industries make it a strong option for investors prioritizing environmental impact. Its unique methodology, which analyzes total greenhouse gas pollution and selects climate leaders across diverse industries, offers a differentiated approach to green investing. While its expense ratio is slightly higher than broad ESG funds, it is competitive for a thematic ETF with such stringent environmental criteria. Its long-term performance since inception, despite recent volatility, suggests its potential to capture growth as the economy continues its transition to a low-carbon future.

5. First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)

• Overview:
  • Ticker: QCLN
  • Expense Ratio: 0.59%
  • Net Assets: $424. million (as of May 16, 2025)
  • Inception Date: February 8, 2007
  • Investment Objective: QCLN seeks to track the performance of the NASDAQ Clean Edge Green Energy Index, which focuses on U.S.-listed companies involved in manufacturing, development, distribution, and installation of clean energy technologies. It invests in growth and value stocks across diversified market capitalizations, with a focus on companies that directly promote environmental responsibility.
• Performance Analysis (NAV returns as of April 30, 2025):
  • 1 Year Return: -13.38%
  • 3 Year Return: -18.48%
  • 5 Year Return: 2.97%
  • 10 Year Return: 4.63%
  • Since Inception: 2.34%
  • QCLN, like many pure-play clean energy funds, has faced significant headwinds in the last 1-3 years, with negative returns. However, its 5-year and 10-year annualized returns are positive, demonstrating its ability to generate growth over longer periods.
• Key Holdings & Sector Exposure (as of May 16, 2025):
  • QCLN holds 48 companies. Its top 10 holdings represent 60.70% of assets.
  • Top Holdings: Rivian Automotive, Inc. (9.77%), First Solar, Inc. (9.74%), Tesla, Inc. (8.88%), ON Semiconductor Corporation (7.10%), Nextracker Inc. (4.92%).
  • Industry Exposure: Automobiles (23.67%), Renewable Energy Equipment (21.11%), Semiconductors (14.93%), Alternative Electricity (11.18%).
  • Geographic Breakdown: Predominantly U.S. (92.10%), with some international exposure.
• Why it stands out for long-term growth: QCLN offers concentrated exposure to the clean energy sector, making it a suitable option for investors seeking direct participation in this thematic area. Its long operational history since 2007, encompassing various market cycles, provides valuable context for its long-term potential. Despite recent challenges, the fund’s positive 5-year and 10-year returns suggest its capacity for recovery and sustained growth as the clean energy transition continues to accelerate. The current valuations, following recent market corrections, could present an opportune entry point for investors with a strong belief in the future of clean energy.

Navigating the Green Investment Landscape

Investing in low-cost green ETFs for long-term growth presents a compelling opportunity for investors seeking to align their financial objectives with environmental sustainability. The analysis of these top ETFs underscores several critical considerations.

Firstly, the significance of low expense ratios cannot be overstated. Fees, even seemingly small percentages, compound over time, directly eroding net returns. Funds like USCA and ESGV, with their ultra-low expense ratios, demonstrate how minimizing costs can significantly enhance long-term wealth accumulation. This principle remains paramount regardless of the specific “green” focus.

Secondly, understanding the spectrum of “green” mandates is essential. While broad ESG funds offer diversified exposure with sustainability screens, pure-play clean energy or climate action funds provide more concentrated investment in companies directly driving the environmental transition. Investors should carefully evaluate their own definition of “green” and choose ETFs whose underlying methodologies and holdings genuinely align with their values and desired impact.

Finally, a long-term perspective is crucial when approaching thematic investments like green energy. The sector has experienced, and may continue to experience, periods of significant volatility and short-term underperformance. These fluctuations are often influenced by broader macroeconomic factors, policy shifts, and energy price dynamics. However, the fundamental drivers for green investments—including global decarbonization mandates, continuous technological innovation, and increasing corporate and consumer commitment to sustainability—remain robust and suggest an undeniable growth trajectory over the long haul. Periods of market downturn, leading to lower valuations, can represent strategic entry points for patient investors.

In summary, for investors committed to sustainable long-term growth, a diversified approach that considers low-cost green ETFs is a prudent strategy. Diligent research into each fund’s investment focus, expense structure, and historical performance within the context of its underlying market drivers is vital. By carefully selecting ETFs that align with their financial goals and environmental values, investors can contribute to a greener future while potentially benefiting from the profound economic transformation underway.