A new government in the White House is enthusiastic about addressing climate change, which has revitalized the clean energy sector. A new target of a 50-52% reduction in greenhouse gas emissions from 2005 levels by 2030 was announced by Vice President Biden in April.

The deployment of offshore wind farms and the provision of financial incentives for the generation of alternative energies are only two examples of green measures that will help achieve this objective.

Since the clean energy boom is still in its infancy, it is impossible to predict which businesses will emerge as market leaders. Instead of gambling on individual firms' success, investors may diversify their holdings by purchasing shares of exchange-traded funds (ETFs) focused on the clean energy sector.

Clean energy exchange-traded funds (ETFs) provide a low-risk alternative to investing in individual equities in the clean energy sector. Here are the top five clean energy ETFs by total assets.

Best 5 Clean Energy ETFs

Exchange-traded funds, or ETFs, that focus on renewable energy sources like wind and solar provide investors exposure to these businesses. Even while these ETFs have the option of active management, most aim to passively follow a market portfolio's performance, such as the S&P Global Clean Energy Index.

Here are five of the best exchange-traded funds (ETFs) that focus on different facets of the clean energy industry:

iShares Global Clean Energy ETF (ticker: ICLN)

ICLN is great if you want to make a diversified bet on the clean energy sector since it follows the S&P Global Clean Energy Index. High diversity is available with the ETF: Its holdings include companies from all over the globe that operate in the clean energy sector.

It includes those that produce biofuels, ethanol, geothermal power, hydroelectric, wind, solar, semiconductor equipment, electrical utilities, and electrical equipment. Investors in clean energy seem to favor ICLN, as the ETF has had significant inflows and currently has an AUM of almost $5.4 billion.

Invesco Solar ETF (TAN)

With around $3 billion in AUM, the Invesco Solar ETF ranks as the second-largest alternative energy exchange-traded fund. TAN's overall expenditure ratio is 0.69%, and its interests are heavily weighted toward solar energy.

This fund may not provide as much diversity as others that invest in many alternative energy sources because of its focus on a single one. Enphase Energy, SolarEdge Technologies (which makes inverters for solar energy systems), and Xinyi Solar Holdings (which makes solar glass) are the top three holdings of TAN as of this time writing.

First Trust Global Wind Energy ETF

Check out the First Trust Global Wind Energy ETF if you're interested in wind power. It is home to two distinct kinds of wind energy businesses:

• Companies that focus only on wind energy and generate at least 50% of their income from wind-related activities are prioritized for funding (60% of the fund).
• Companies with diversified business activities also involved in the wind sector make up 40% of the fund.

With its exclusive concentration on wind power, this ETF is a great choice for anyone looking to capitalize on the industry's rapid expansion. In addition to its wind energy pure plays, it also provides wide geographic diversity and exposure to diversified firms with some wind activity.

When considering environmental, social, and governance (ESG) criteria, MSCI gives the First Trust Global Wind Energy ETF a high AA grade. Overall, it has an ESG score that places it in the 80th percentile of all ETFs, and more than 50% of the fund's holdings are AAA or AA, rated by MSCI.

Global X Renewable Energy Producers ETF

The only focus of the Global X Renewable Energy Producers Exchange Traded Fund is on companies that generate electricity from renewable sources, including wind, solar, hydro, and geothermal power. Those who are looking to put their money completely into renewable energy sources have the option of doing so.

The fund's very low asset size of $120.1 million under administration is cause for worry. It might indicate that few investors are interested in the offering. An investment of $1,000 would cost $6.50 per year, according to the fund's expense ratio of 0.65%.

VanEck Low Carbon Energy ETF (SMOG)

SMOG aims to create an investment vehicle that performs similarly to the MVIS Global Low Carbon Energy Index, which measures the market value of firms involved in renewable energy technologies.

Smart grid technologies, building and industrial materials that may decrease energy consumption or carbon emissions, and renewable energy sources like wind, hydro, hydrogen, bio-fuel, solar, or geothermal power are all in this category.

As of this writing, SMOG has lost 19% and 13% year to date and yearly, respectively, which is not very impressive. May was a significant month for SMOG, as well as for other clean-energy ETFs.

Positive gains were recorded at a more modest 2 percent than other funds, and the month was significant for the ETF. On the other hand, SMOG is a better long-term investment for investors wanting exposure to the clean-energy industry due to the fund's greater worldwide diversification.

Conclusion

Investments in clean energy ETFs may provide shareholders exposure to a wide range of firms in the renewable energy sector, including those in solar, wind, hydro, and electric vehicles.

Long-term gains from investing in clean energy companies have been substantial, but the market risk associated with this energy niche is often greater than that of broad market indexes. Using these exchange-traded funds, anybody may readily invest money toward developing renewable energy.

While some invest just in wind power or another niche area of alternative energy, others provide wider exposure to the clean energy investment market. That way, investors may zero down on a specific trend within the green energy sector, lowering the odds of making a poor stock selection.