Green/Clean Energy ETFs vs. ESG ETFs: A Late 2025 Comparison

Sustainable investing used to feel like one big happy family: buy anything labeled “green” or “ESG” and you could sleep well knowing you were saving the planet while still making money.2025 has shattered that illusion.
While broad-market ESG funds (the ones that simply tilt the S&P 500 toward better-behaved companies) have chugged along with respectable but unremarkable gains of 22–26% YTD—basically riding the coattails of Nvidia, Microsoft, and Apple—dedicated clean energy ETFs have left them in the dust, posting eye-watering returns of 30–50% in the same period.
Lower interest rates, explosive electricity demand from AI data centers, revived nuclear momentum, and a global rush into solar and batteries have turned pure-play green energy funds (ICLN, TAN, QCLN) into some of the hottest performers of the year. Meanwhile, many ESG strategies remain stubbornly mega-cap tech heavy because today’s tech giants score surprisingly well on governance and social metrics—even as their actual carbon footprints balloon.
So which approach deserves your capital right now?

• The concentrated rocket ship of clean energy that’s finally living up to a decade of promises?
• Or the smoother, lower-cost ESG core that still captures most market upside without the stomach-churning volatility?

In this late-2025 showdown, we’ll compare the top funds head-to-head: performance, holdings, risk, fees, and real-world portfolio fit—so you can decide whether “sustainable” still means playing it safe… or finally going all-in on the energy transition.

What is an ESG ETF?

ESG funds are investments that are graded using ESG (environmental, social and governance) principles. ESG funds invest in companies that aim to have a sustainable and societal impact in the world, such as those with a small carbon footprint or diverse leadership boards.

ESG funds are not individual stocks. They are a collection of multiple stocks grouped together. Buying a fund rather than an individual stock can decrease risk since a fund holds shares of many companies rather than just one.

Exchange-traded funds (ETFs) are similar to index funds and other passively managed funds. The main difference is that ETFs can be traded throughout the day, similar to stocks.

Green Energy vs Clean Energy: What's the Difference

Green energy refers specifically to renewable energy sources that have minimal environmental impact, such as solar and wind power. Clean energy, on the other hand, encompasses a broader range of energy sources that produce little to no pollution, including some renewable sources as well as certain nuclear power technologies.

 

Best Green/Clean Energy ETFs

Thematic focus on renewables, solar, wind, etc.

• ICLN – iShares Global Clean Energy ETF
  Expense Ratio: 0.39%
  AUM: ~$2–3B
  YTD Return 2025: ~45–50%
  Notes: Broad global exposure to solar, wind, and other renewables. Strong 2025 rebound driven by lower rates, AI power demand, and policy support.
• TAN – Invesco Solar ETF
  Expense Ratio: 0.69%
  AUM: ~$1–1.5B
  YTD Return 2025: ~35–45%
  Notes: Pure solar play; benefits from efficiency gains and surging global demand but more volatile.
• QCLN – First Trust NASDAQ Clean Edge Green Energy ETF
  Expense Ratio: 0.59%
  AUM: ~$600–800M
  YTD Return 2025: ~30–40%
  Notes: U.S.-heavy with EVs, batteries, and renewables (e.g., Tesla, Enphase).

Best ESG ETFs

Screen large-cap stocks for overall Environmental, Social, Governance factors

1. ESGU – iShares ESG Aware MSCI USA ETF
   Expense Ratio: 0.15%
   AUM: ~$12–13B+
   YTD Return 2025: ~22–26%
   Notes: Large-cap U.S. focus; tilts toward better ESG scores but still heavy in tech giants (Nvidia, Microsoft, Apple). Tracks close to S&P 500.
2. SUSL – iShares ESG MSCI USA Leaders ETF
   Expense Ratio: 0.10%
   AUM: ~$10–12B
   YTD Return 2025: ~22–26%
   Notes: Selects top ESG leaders in each sector; very low cost, similar performance to broad market.
3. VSGX – Vanguard ESG International Stock ETF
   Expense Ratio: 0.12%
   AUM: ~$4–5B
   YTD Return 2025: ~12–16%
   Notes: Ex-U.S. developed + emerging markets with ESG screens; more diversified globally but lags U.S.-centric funds.

Head-to-Head Summary (Late 2025)

• 2025 Winner on Returns: Clean/Green Energy ETFs have significantly outperformed broad ESG funds this year (~30–50% vs. ~20–26% for U.S. ESG leaders), thanks to falling interest rates boosting project financing, explosive AI/data center electricity needs (favoring renewables/nuclear), and lingering global subsidies.
• Volatility: Clean energy is much higher — sharp swings from policy changes, commodity prices, and supply-chain issues. ESG funds are far smoother, behaving like slightly tweaked S&P 500 or MSCI World indexes.
• Focus & Holdings:
  – Clean Energy: Pure thematic (solar panels, wind turbines, batteries, utilities shifting green). Often mid/small-cap heavy, global but concentrated in industrials/utilities/tech.
  – ESG: Broad market with screens/exclusions (e.g., no tobacco, weapons, heavy polluters). Still dominated by mega-cap tech (Magnificent 7 often ~30–40% of fund) because many score well on governance/social metrics.
• Overlap: Some — clean energy companies often rank high on the "E" in ESG, so broad ESG funds hold a bit of renewables, but nowhere near the concentration of dedicated green funds.
• Costs & Liquidity: ESG wins easily (0.10–0.15% vs. 0.39–0.69% for clean energy) and massive daily volume/AUM.
• Long-Term Outlook:
  – Clean Energy: Higher growth potential from decarbonization megatrend but cyclical and policy-sensitive.
  – ESG: More resilient, market-like returns with mild "values" tilt; increasingly seen as core holdings rather than satellites.

Which One Makes Sense for a Portfolio Right Now?

• Want aggressive growth and pure exposure to the energy transition → Clean Energy ETFs (ICLN or QCLN for diversification, TAN if bullish on solar).
• Prefer steady, low-cost performance with a light sustainability overlay (and still capture most tech upside) → Broad ESG (ESGU or SUSL).
• Balanced view → Use ESG as core (70–80%) + small clean energy satellite (10–20%) for extra green tilt without excessive volatility.

In late 2025, clean energy has been the clear short-term winner, but broad ESG offers better risk-adjusted returns over full cycles.
Disclaimer: Performance figures are approximate and time-sensitive. This is general information only — not personalized investment advice. Both categories are influenced by policy and rates; always check current data and consult a financial advisor.