A rise in global warming, environmental concerns, and natural disasters has also led to a shift in energy sources. With more policies and measures undertaken to rely on renewable energy, it has also become an avenue which is not only beneficial for the planet but can also be rewarding for investors. Investing in a renewable energy mutual fund can be a viable option for investors seeking exposure to the sector and sustainable investing. In this blog, we will discover the best renewable energy mutual funds and who should invest in them.
Renewable energy mutual funds are typically equity mutual funds that pool investors' money and invest it in shares of companies in the renewable energy sector. These funds are categorised as thematic mutual funds because they focus on renewable energy.
A renewable energy mutual fund allows investors to gain exposure to businesses involved in solar, hydro, wind, and other renewable energy sources. These funds invest in several companies that generate, distribute, or supply renewable energy.
Before investing in a renewable energy mutual fund, investors should ascertain whether it is a suitable option for them.
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| Fund Name | Category | Risk | NAV | Expense Ratio | 1Y Returns | 3Y Returns | 5Y Returns | Rating | Fund Size (in Cr) | Exit Load |
|---|---|---|---|---|---|---|---|---|---|---|
DSP Natural Resources and New Energy Fund | Equity | Very High | 110.78 | 0.88 | 18.4% | 21.4% | 23.5% | -- | ₹1,474 | - |
Tata Resources & Energy Fund | Equity | Very High | 53.98 | 0.53 | 11.7% | 18.2% | 20.7% | -- | ₹1,198 | Exit load of 0.25% if redeemed within 30 days. |
SBI Energy Opportunities Fund | Equity | Very High | 10.76 | 0.8 | 4.5% | NA | NA | -- | ₹9,209 | Exit load of 1%, if redeemed within 30 days. |
ICICI Prudential Energy Opportunities Fund | Equity | Very High | 10.47 | 0.58 | 10.4% | NA | NA | -- | ₹9,643 | Exit load of 1%, if redeemed within 3 months. |
Baroda BNP Paribas Energy Opportunities Fund | Equity | Very High | 11.45 | 1.01 | NA | NA | NA | -- | ₹725 | Exit Load for units in excess of 10% of the investment,1% will be charged for redemption within 1 year. See more |
Kotak Energy Opportunities Fund | Equity | Very High | 10.15 | 0.92 | NA | NA | NA | -- | ₹241 | Exit load of 0.5%, if redeemed within 90 Days. |
Before investing in a renewable energy mutual fund, investors should ascertain whether it is a suitable option for them.
One of the key advantages of investing in a renewable energy mutual fund is the focus on sustainability and creating a positive impact on the environment and society. By investing in renewable energy companies, investors can help protect the environment and make it more sustainable.
Through a renewable energy fund, investors can gain exposure to a range of renewable energy companies. This not only allows the investors to diversify within the sector but can also be a valuable addition to create a diverse and comprehensive portfolio.
Governments around the world are taking initiatives to transition from traditional to renewable energy sources. A renewable energy fund allows investors to capture the growth in this sector as more countries adopt renewable energy.
To address climate change, many countries are introducing stringent regulations on carbon emissions and their environmental impacts. A renewable energy mutual fund consists of green energy companies that may fare better in the long term than traditional energy companies.
Government policies and regulations significantly impact the renewable energy and green energy sectors. Although governments are actively promoting the adoption of green energy, any pullback in incentives or regulatory changes could negatively impact the sector.
A major risk of investing in a renewable energy mutual fund is the sector's maturity. Many renewable energy companies are young and in the growth stage. As a result, they might witness heightened volatility along with operational and financial risks.
The renewable energy sector is constantly evolving, with rapid changes to generate energy in the most sustainable way. More advanced, newer technologies can affect existing technologies, rendering them obsolete.
Being primarily equity-focused, a renewable energy mutual fund is subject to market risks. Market trends, economic conditions, and geopolitical factors can significantly affect a mutual fund's net asset value (NAV). High valuations are common across the renewable energy sector globally, making it sensitive to rate hikes.
Renewable energy mutual funds are equity funds and are taxed accordingly.
Gains on units sold are subject to capital gains tax. Gains on units sold for less than 12 months attract short-term capital gains tax of 20%.
Long-term capital gains tax applies to units sold after 12 months if the gains exceed the threshold of ₹1.25 lakh. The applicable LTCG tax rate is 12.5%
A renewable energy mutual fund is an equity-oriented mutual fund that invests in renewable energy companies. These companies generate, supply, or distribute green energy, such as solar, wind, or hydro.
Renewable energy mutual funds can be a suitable investment option as countries across the world are shifting from traditional energy sources to green, renewable energy. These funds also offer exposure to various companies and can be ideal for investors seeking sustainable investments.
Being equity-focused funds, renewable energy mutual funds can be volatile. The fund's performance is influenced by sectoral performance and broader market conditions.
Renewable energy funds can be suitable for beginners looking to invest in the green energy space. However, these funds carry a higher risk.
Since renewable energy is a developing sector, returns could be cyclical. Renewable energy mutual funds can be ideal for investors with a long-term investment horizon.
Renewable energy mutual funds are equity-oriented funds and are taxed accordingly. Gains on units sold for less than 12 months attract STCG of 20%. Units sold after 12 months are subject to LTCG of 12.5%.
Now let us jump and check about these top 6 mutual fund schemes.
Fund Performance: The DSP Natural Resources and New Energy Fund has given 21.42% annualized returns in the past three years and 23.54% in the last 5 years. The DSP Natural Resources and New Energy Fund comes under the Equity category of DSP Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in DSP Natural Resources and New Energy Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹1,474Cr |
| 1Y Returns | 18.4% |
Fund Performance: The Tata Resources & Energy Fund has given 18.23% annualized returns in the past three years and 20.69% in the last 5 years. The Tata Resources & Energy Fund comes under the Equity category of Tata Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Tata Resources & Energy Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,198Cr |
| 1Y Returns | 11.7% |
Fund Performance: The SBI Energy Opportunities Fund comes under the Equity category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Energy Opportunities Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹9,209Cr |
| 1Y Returns | 4.5% |
Fund Performance: The ICICI Prudential Energy Opportunities Fund comes under the Equity category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Energy Opportunities Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹9,643Cr |
| 1Y Returns | 10.4% |
Fund Performance: The Baroda BNP Paribas Energy Opportunities Fund comes under the Equity category of Baroda BNP Paribas Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Energy Opportunities Fund via lump sum is ₹1,000 and via SIP is ₹500.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹725Cr |
| 1Y Returns | NA |
Fund Performance: The Kotak Energy Opportunities Fund comes under the Equity category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Energy Opportunities Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹241Cr |
| 1Y Returns | NA |
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