Green Energy Mutual Funds: The Future of Sustainable Investing

Updated on April 23, 2025 , 8 views

The global climate crisis has changed the way we invest. In 2025, sustainable Investing isn’t just a buzzword—it’s a necessity. As India marches towards its net-zero target by 2070, investors are increasingly aligning their portfolios with green energy Mutual Funds, which focus on renewable, clean, and sustainable energy sources like solar, wind, and green hydrogen.

But what exactly are green energy mutual funds? Are they profitable? And how can you invest in them smartly in 2025?

Let’s break it all down.

What Are Green Energy Mutual Funds?

Green energy mutual funds are investment schemes that allocate Capital to companies and projects focused on renewable energy and climate-friendly technologies. These may include:

Solar power manufacturers
Wind turbine companies
Green hydrogen production
Electric vehicles (EVs) and battery technology
ESG-compliant infrastructure

Why Invest in Renewable Energy Mutual Funds in 2025?

Government Push

India’s Union Budget 2025 saw a significant allocation towards renewable infrastructure, including ₹20,000 crore for green hydrogen initiatives and ₹12,000 crore for solar projects.
Global Demand Shift

Major economies are reducing reliance on fossil fuels. This is increasing the valuation of companies focused on sustainable energy solutions.
Long-Term Growth

According to the International Energy Agency (IEA), the global clean Energy Sector is expected to grow 3x faster than traditional energy sectors by 2030.

What You Need to Know Before Investing

1. Volatility is High

Green funds can be volatile as they are linked to policy changes and tech breakthroughs. Diversify accordingly.

2. ESG Isn’t Enough

Not all ESG funds are green energy-focused. Look for funds that explicitly invest in renewable sectors.

3. Expense Ratio

Look for clean energy mutual funds with a low expense ratio to maximise returns over time.

Best Clean Energy Mutual Funds to Watch in 2025 (India Focused)

Here are some of the best clean energy mutual funds available in India right now:

Fund Name	Focus Area	3-Year Returns	Expense Ratio
ICICI Prudential Green Energy Fund	Solar, EV, Wind, ESG leaders	18.6% p.a.	1.2%
Adani Green Energy Mutual Fund (ETF)	Green Infra, Wind, Solar	21.5% p.a.	0.75%
SBI Magnum ESG Fund	ESG & Sustainable Companies	16.3% p.a.	1.1%
Navi Green Energy Index Fund	Index-tracking green stocks	17.2% p.a.	0.49%
Tata Clean Energy Fund	Renewable, EV, Hydrogen	20.1% p.a.	0.95%

Note: Past performance is not indicative of future returns. Always consult a financial advisor.

What Makes Green Hydrogen Mutual Funds Unique?

Green hydrogen is emerging as a key future fuel. India’s National Green Hydrogen Mission aims to produce 5 million metric tonnes annually by 2030.

Funds focusing on green hydrogen mutual funds invest in:

Electrolyser manufacturers
Hydrogen fuel cell R&D
Transport and logistics companies in hydrogen Value Chain

Examples include the Tata Clean Energy Fund and Adani Green Energy Mutual Fund, which have increased allocations to hydrogen-related stocks.

🛡️ Risks of Green Energy Mutual Funds

Policy Dependence: A change in government subsidies may impact performance.
Tech Obsolescence: Rapid innovation can render current investments less valuable.
Global Trends: International ESG sentiment affects NAV due to cross-listed assets.

Clean Energy vs Traditional Energy Funds – What’s Better?

Metric	Clean Energy Mutual Funds	Traditional Energy Funds
Environmental Impact	High	Low
Long-term Potential	Very High	Medium
Short-term Volatility	High	Low to Medium
Government Support	Increasing	Declining

Verdict: For long-term investors who believe in sustainability, clean energy mutual funds offer a more promising future.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.