Best Green Energy Mutual Funds In India 2026: Top Picks, Returns And How To Invest
Investors in India are moving attention from conventional domains to sustainable investment opportunities. As concerns about climate change increase and clean technologies grow, a new generation of mutual funds is becoming prominent: green energy mutual funds.
Green investments allow people to finance environmental development and, in the process, potentially earn long-term returns. They invest in companies that are part of carbon-neutral investment themes like solar and wind infrastructure. With increasing government support, demand for green energy mutual funds is likely to increase each year.
In this article, we will examine what these funds provide, which are doing the best, and why 2025 can be the best time to add them to your portfolio.
What Are Green Energy Mutual Funds ?
Green energy mutual funds are basically funds that invest mostly in businesses that contribute to a sustainable environment. The categories include solar power, electric vehicles (EVs), battery technology, green hydrogen, and other clean energy solutions. These funds represent an increasing trend globally towards sustainable investing in India.
In contrast to conventional mutual funds, these are powered by environmentally friendly themes, which frequently coincide with ESG mutual funds 2025. They have environmental, social, and governance as their priority factors. For eco-conscious investors, these eco-friendly mutual funds provide a focused and substantial method of values alignment in investments.
ESG And Thematic Investing Explained
ESG investing in India in 2025 is going mainstream, with fund managers using filters that extend beyond the financials. ESG criteria assess how a company handles its environmental footprint, social responsibility, and governance practices.
Although top-performing ESG funds frequently overlap with green energy funds, not all ESG funds target climate-related sectors exclusively. This is where thematic mutual funds differentiate themselves. They stay along with one core theme, such as climate action or clean energy, and invest in that. This concentrated approach can result in increased sectoral exposure and increased impact potential for investors looking for climate-focused mutual funds.
Sectors Covered In Green Energy MF: Solar, EVs, Clean Tech
The major sectors in green energy mutual funds are:
- Solar Energy: This includes firms involved in solar panel manufacturing, storage systems, and rooftop solar.
- Electric Vehicles (EVs): EVs are one of the fastest-growing sectors in India. This encompasses EV makers, battery makers, and developers of EV infrastructure as well.
- Clean Tech: This is a larger bracket that encompasses wind power, green hydrogen, smart grids, waste-to-energy, etc.
Certain funds also invest in carbon offset platforms or companies fostering carbon-neutral investment strategies. For investors who want to invest in solar and EV mutual funds, green energy schemes are a diversified method in these sectors that are on the rise.
Best Performing Green Funds In India In 2025
Here are some of the high-return green energy mutual funds presently listed in India's market. These funds are selected on the basis of their age (the fund should be at least 5 years old) and their historical returns.
Fund Name | Type | AUM (INR Cr) | 1-Year Return | Min. Investment |
ICICI Prudential Energy Opportunities Fund | Energy Sector Fund | 10,385 | ~16–18% | INR 1,000 |
SBI Energy Opportunities Fund | Energy Sector Fund | 10,305 | ~15–16% | INR 500 |
DSP Natural Resources and New Energy | Thematic (Energy + Resources) | 2,043 | 31.8% (1Y), 25.2% (3Y) | INR 100 |
Tata Resources & Energy Fund | Energy Sector Fund | 1080 | ~15–16% | INR 500 |
Baroda BNP Paribas Energy Fund | Energy Sector Fund | 750 | ~4–8% | INR 500 |
Kotak Energy Opportunities Fund | Energy Sector Fund | 171 | NA | INR 500 |
Source: ET Money, as of April 20262
1. Tata ESG Fund – Regular Plan – Growth
This fund invests in large-cap firms with good ESG credentials, such as the leaders in clean energy. It offers exposure to solar, EVs, and sustainable infrastructure while having a diversified portfolio across industries.
2. SBI Magnum Global ESG Fund – Growth
This fund combines domestic equities with high ESG scores, offering both growth and sustainable impact. It allocates a significant portion to renewable energy, electric mobility, and clean tech innovators.
Green Energy Fund vs ESG Fund
Feature | Green Energy Mutual Funds | ESG Mutual Funds |
| Focus of Investment | Renewable and clean energy (solar, wind, power, infrastructure) | Companies across sectors meet ESG criteria |
| Type | Thematic (sector-specific) | Diversified equity with screening |
| Diversification | Low (concentrated in one sector) | High (multi-sector exposure) |
| Risk Level | Higher due to sector concentration | Moderate due to diversification |
| Return Potential | High but volatile | Stable, relatively balanced |
| Key Objective | Capitalise on energy transition and growth | Invest responsibly while maintaining diversification |
| Suitable For | Investors with a higher risk appetite and a long-term view | Investors seeking balanced, sustainable investing |
Green Energy Mutual Fund Risks
There are several green energy mutual fund risks that need to be considered for proper evaluation. Due to its thematic nature, the mutual fund is likely to be affected by developments within the energy industry.
1. Policymaking Risks
Renewable energy firms rely significantly on government policies, subsidies, and regulations. If there are changes in these factors, there might be adverse impacts on the firm’s performance and, consequently, the mutual fund returns.
2. Dependency on Global Commodity Prices
The performance of the renewable energy companies depends on the global commodity price trends. The funds might be impacted by any changes in the commodity prices, such as those of lithium and copper.
3. Concentration Risk
Most green energy investments include very few companies. Many times, 60-70% of the holdings in such funds consist of just the top 10 stocks.
4. Underperformance During Bear Markets
It is not uncommon for the green energy funds to perform poorly compared to other stock funds in bear markets. Since they are sector-based, they are bound to be quite volatile.
How To Track Performance Of Green Mutual Funds ?
Performance tracking of green energy mutual funds involves much more than merely observing short-term performance. As they are thematic sector funds, there is a need for performance monitoring within the appropriate context.
1. Comparison with Relevant Index: When performing a performance evaluation, ensure that you always benchmark against indices relevant to the fund, such as the Nifty Energy TRI index or Nifty India Clean Energy index, rather than general indices such as Nifty 50.
2. Performance Analysis Based on Time Frame: Always consider the performance results obtained in different time periods, such as one year, three years, and five years, where applicable.
3. Portfolio Holding and Exposure: Check the portfolio’s holdings and exposure to see whether there are any differences. This is because these funds tend to be quite concentrated.
4. Consider Cost Effectiveness: It is important to monitor cost-effectiveness, such as expense ratios or any other factors that could affect the performance of the investment in the long term.
5. Monitor Sector Development: Look out for developments in sectors such as renewable energy, policy from governments, and global commodity pricing.
Why Consider Green Investing Now?
As global climate targets rose and India's energy transition began, the green energy mutual fund case has never been more compelling.
1. Government Policies And Global Trends
Certain developments have generated investor demand for climate-focused mutual funds and green finance in India, compelling fund houses to innovate on the sustainability theme.
- India has the goal of net-zero emissions by 2070.
- The government has launched production-linked incentives (PLIs) and a budget for clean tech, EVs, etc.
- Across the world, the regulation of ESG is becoming more stringent. Europe's SFDR and America's SEC climate disclosures are redefining the market.
2. Growth Opportunities And Challenges
Green spaces have high growth prospects because they are in sync with macro trends and are supported by policy, too. For instance:
- The Indian EV market is expected to reach INR 20 lakh crore by 2030, as publicly stated by Union Minister Nitin Gadkari at various industry events in late 20243.
- Solar adoption is growing very fast in both industrial and residential segments.
This creates opportunities for clean energy mutual fund returns through companies working in these ecosystems.
However, investors also need to remain informed of related risks.
- Green energy mutual funds tend to face high volatility and regulatory changes.
- Due to their thematic nature, they usually exhibit concentrated exposure, enhancing gains and losses.
Things To Know Before You Invest In Green Mutual Funds
Prior to investing in green energy mutual funds, one should be aware of the distinct features of such schemes. They do not possess market exposure like general market funds but have defined exposures, chances, and constraints.
1. Volatility And Sector Concentration
Green energy mutual funds are predominantly weighted in solar, EVs, and clean technology. These concentrations can create periods of underperformance when the sectors turn negative. Also, most of these companies are in the initial stages of growth, and thus their stocks are more vulnerable to policy changes and the market's mood. Such volatility is not usually found in more diversified funds.
2. Long-Term vs Short-Term Outlook
Climate-focused mutual funds are the most appropriate long-term wealth-building strategy. Patient investors with a willingness to endure market cycles can reap huge rewards from the clean energy structural change. For instance, early investors in EV supply chain stocks have already experienced exponential growth.
Most people should invest in thematic mutual funds in India with a time horizon of 5 to 7 years. A systematic investment via green energy SIP plans also saves on rupee-cost averaging and timing risk.
Conclusion
India's clean energy transition is an economic opportunity. As the world is increasing the adoption of solar energy, electric vehicles, and clean technologies, green energy mutual funds are becoming a key instrument to invest in this transition. There are risks involved because of sector-specific exposure and market fluctuations. However, judicious strategies, like investing through green energy SIP plans, can provide robust long-term value.
If you are ready to diversify beyond traditional equities, explore Grip Invest today. On Grip, you can explore fixed income opportunities like corporate bonds and securitised debt instruments offering up to 14% fixed returns.
FAQs On Green Energy Investing
References:
- PersonalFN, accessed from: https://www.personalfn.com/mutual-funds/best-funds/factsheet/tata-ethical-fund-g-direct-plan?utm_
- ET Money , accessed from: https://www.etmoney.com/mutual-funds/compare/icici-prudential-energy-opportunities-fund-vs-dsp-natural-resources-and-new-energy-fund?schemeIds=44776%2C6915&
- Business Standard, accessed from: https://www.business-standard.com/industry/auto/indian-ev-market-to-touch-rs-20-trn-by-2030-to-create-50-mn-jobs-gadkari-124121900707_1.html
 |
Author: Grip Invest Editorial Team The Grip Invest Editorial Team is a group of Chartered Accountants, MBA (Finance) graduates, and Qualified Research Analysts dedicated to helping you invest smarter. We dive deep into India's fixed income landscape to deliver content that is accurate, up-to-date, and easy to understand. Whether you're exploring bonds, fixed deposits, or other fixed income opportunities, our guides cut through the noise and give you the clarity to make better financial decisions. |
Want to stay at the top of your finances?
Join the community of 4 lakh+ investors and learn more about Grip Invest, the latest financial knick-knacks, and shenanigans in the world of investing.
Happy Investing!
Disclaimer - Investments in debt securities/municipal debt securities/securitised debt instruments are subject to risks including delay and/ or default in payment. Read all the offer related documents carefully. The investor is requested to take into consideration all the risk factors before the commencement of trading.
This communication is prepared by Grip Broking Private Limited (bearing SEBI Registration No. INZ000312836 and NSE ID 90319) and/or its affiliate/ group company(ies) (together referred to as “Grip”) and the contents of this disclaimer are applicable to this document and any and all written or oral communication(s) made by Grip or its directors, employees, associates, representatives and agents. This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip does not guarantee or assure any return on investments and accepts no liability for consequences of any actions taken based on the information provided. For more details, please visit www.gripinvest.in
Registered Address - 106, II F, New Asiatic Building, H Block, Connaught Place, New Delhi 110001
