Why this ASX ETF could be the simplest way to play the global clean energy boom

Picking winners in the clean energy sector is a difficult thing to do.

Solar panel manufacturers, wind turbine developers, electric vehicle companies, and battery storage businesses all move in different cycles and carry very different risk profiles.

For investors who want broad exposure to the clean energy transition without the risk of backing the wrong horse, the Betashares Climate Change Innovation ETF (ASX: ERTH) offers a simple and diversified solution.

What ERTH actually holds

ERTH tracks an index of up to 100 leading global companies that derive at least 50% of their revenues from products and services that reduce or avoid carbon emissions.

That definition is broad, capturing clean energy providers, green transport companies, energy efficiency businesses, waste management innovators, sustainable food producers, and energy storage specialists.

Top holdings include Vertiv Holdings, Bloom Energy, ABB, and ASML.

Investors therefore have exposure to companies operating across the entire clean energy value chain rather than any single technology.

The fund charges a management fee of 0.65% per annum and pays distributions annually.

Why the investment case is strengthening

The macro backdrop behind ERTH has rarely been more supportive.

The International Energy Agency estimates that global energy investment exceeded US$3 trillion in 2024, with roughly two-thirds directed towards clean energy, electrification, grids, and storage.

In its own research, Betashares has stated:

Climate technology should no longer be viewed as a discretionary or thematic allocation. The physical impacts of climate change are increasingly being felt and have material economic consequences, and the transition is increasingly underpinned by energy system economics rather than environmental policy alone.

The performance picture

ERTH had a difficult 2025, falling alongside the broader clean energy sector as higher interest rates weighed on growth-oriented and capital-intensive businesses.

That pullback has created a more attractive entry point for long-term investors.

ERTH’s one-year return is approximately 24%, recovering strongly from its late 2025 lows as rate cut expectations returned to global markets and clean energy sentiment improved.

The risks worth knowing

ERTH is not a defensive investment.

The fund carries meaningful volatility, and the clean energy sector remains sensitive to interest rate movements, government policy changes, and commodity price fluctuations.

The US’ rollback of several US clean energy incentives in 2025 weighed on parts of the portfolio, and investors should factor in the possibility of further policy headwinds in the United States.

Currency risk is also present, as the fund’s underlying holdings are denominated in US dollars and other foreign currencies.

Foolish takeaway

The clean energy transition is a multi-decade investment theme, and ERTH gives Australian investors a diversified, low-friction way to participate in it from a single ASX trade.

For investors who believe the energy system is being permanently rewired toward cleaner sources and want broad exposure to that shift without picking individual companies, ERTH is worth serious consideration.

The post Why this ASX ETF could be the simplest way to play the global clean energy boom appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ASML, Abb, Bloom Energy, and Vertiv. The Motley Fool Australia has recommended ASML. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.