For Energy Investors, Is a Traditional Energy ETF a Better Bet Than Clean Energy?
2026-07-25 16:30
•Brendan Coffey •The Motley Fool
•••• •••• Axe Capital view
Traditional vs Clean Energy: Which Bet Works for SA Investors?
Comparing traditional energy ETFs with clean energy plays through a South African lens.
Traditional energy ETFs like XLE score on dividends and stability, qualities many investors appreciate in a jittery market. South African giant Sasol, closely linked to fossil fuels, reflects this sturdiness but also faces longer-term structural risks as the world shifts away from oil and gas. In contrast, clean energy ETFs like ICLN offer exposure to renewables, a sector poised for growth but with higher volatility and uncertainty. For South African investors, the rand’s behavior against the dollar matters here: a weaker rand inflates energy import costs, potentially benefiting local producers like Sasol. Yet, if global clean energy adoption accelerates, companies aligned with renewables could outperform, either directly or through international holdings. I lean towards watching clean energy funds for patient investors who can stomach bumps and want a foot in the future energy economy. Meanwhile, traditional energy counters like Sasol remain worth a hold for income seekers, but trimming is prudent if renewable momentum picks up sharply. this is just my opinion and not financial advice
Hold Sasol for dividend income but consider trimming exposure if renewables gain faster traction. Accumulate clean energy ETFs cautiously, if you have a long horizon and can handle volatility.
- Sasol
- XLE
- ICLN
- USD/ZAR
- Faster-than-expected global energy transition reducing fossil fuel demand
- Rand volatility affecting cost structures and earnings of energy companies
7/10
The article compares State Street Energy Select Sector SPDR ETF (XLE), which focuses on traditional fossil fuels, with iShares Global Clean Energy ETF (ICLN), which invests in renewable energy companies. XLE offers lower fees (0.08% vs 0.39%), higher dividend yield (2.60% vs 1.00%), and lower volatility, while ICLN provides greater diversification and exposure to the growing renewable energy sector. The author recommends ICLN for long-term investors who can tolerate near-term volatility, citing the macro trend toward renewable energy and superior 10-year returns.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Brendan Coffey
Categories: Rates, Equities, Capital Returns, Commodities
Tickers: XLE, ICLN, CVX, COP
Sentiment: Positive - XLE demonstrates strong near-term performance (41% 1-year return) and lower costs/volatility, but the article recommends ICLN for long-term investors, suggesting traditional energy is less favorable for future growth despite current strength. The article explicitly recommends ICLN as the better buy for investors who can tolerate volatility, citing superior 10-year annualized returns (10.7% vs 8.9%) and the macro trend toward renewable energy adoption.
Keywords: energy ETF, traditional energy, clean energy, renewable energy, fossil fuels, dividend yield, expense ratio, volatility
Insights:
- XLE: Neutral: XLE demonstrates strong near-term performance (41% 1-year return) and lower costs/volatility, but the article recommends ICLN for long-term investors, suggesting traditional energy is less favorable for future growth despite current strength.
- ICLN: Positive: The article explicitly recommends ICLN as the better buy for investors who can tolerate volatility, citing superior 10-year annualized returns (10.7% vs 8.9%) and the macro trend toward renewable energy adoption.
- CVX: Neutral: Second-largest holding in XLE at 14.4%, representing traditional fossil fuel exposure with neutral outlook relative to renewable alternatives.