Top Performing Clean Energy Mutual Funds in 2025

Clean energy mutual funds are actively managed investment instruments that primarily focus on stocks within the renewable energy sector. One such sector fund that has gained widespread popularity since its inception on 22nd July 2024 is the ICICI Prudential Energy Opportunities Fund. 

Although new, it has delivered a remarkable 18.92% absolute return over the past 6 months. If you want to learn about other top-performing green energy mutual funds in India and their investment risks, continue reading this blog.

Quick Synopsis 

• Clean energy mutual funds offer diversification across solar, wind, hydrogen, and renewable companies, helping investors participate in the sector’s growth.
• Government policies, technological changes, and market volatility can directly impact returns in clean energy funds.
• Tax benefits apply to profits above ₹1.25 lakh for long-term holdings (more than 12 months).

5 Best Green Energy Mutual Funds to Invest in 2025 

Note: The data provided in the table above is dated as of 5th September 2025. For more precise information on parameters such as annualised returns, expense ratio, risk, etc., please refer to the respective fund house’s official website.

Benefits of Investing in Clean Energy Mutual Funds

Clean energy funds are gaining momentum as it is seen as the future of the energy sector. The world is slowly shifting towards clean and renewable energy so investing in clean energy mutual funds is expected to give good returns in future. Here are some more insights into why investing in clean energy mutual funds could be a right move.

Including a Mutual Fund for Green Energy Helps Mitigate Risk

With clean energy funds, you gain a well-diversified exposure to various stocks within the renewable energy space. This includes organisations that are slowly emerging as well as established energy firms. Hence, it reduces the risk of your portfolio’s underperformance for a particular company's stock.

Investors Can Gain Profits Through Sectoral Growth

Upcoming government projects and the gradual shift toward renewable energy trends make green energy a promising growth area. Therefore, you may consider investing in mutual funds that focus specifically on green hydrogen, solar energy, and other renewable sectors. These funds can significantly benefit from future government initiatives and technological advancements.

One Can Directly Invest in the Best Clean Energy Mutual Funds

For retail investors who are new to the market, spotting the top-performing clean energy stocks individually might be tricky. However, you can avoid this hassle and still become a part of these companies’ growth by investing in funds that aim for long-term profitability for their investors.

Nonetheless, these investments are risky, and you must be involved to manage your portfolio. If you want to avoid the risk and earn assured returns of 8.40% per annum, consider investing in a digital fixed deposit via Stable Money. 

Risks of Investing in Green Energy Funds

To date, clean energy stocks in India have undergone significant fluctuations. For instance, Adani Green’s stock climbed from just ₹29.45 in 2018 to a peak of ₹2,874.80 in 2022. Eventually, the price plunged to around ₹889.75 due to market downturns and corporate governance concerns. 

Thus, to make well-informed financial decisions in terms of investing in green energy mutual funds, be aware of the following possibilities: 

• Regulatory and Policy Risks

Changes and uncertainties in government policies, subsidies, or regulations can impact investments in green energy. To mitigate these risks, it is essential to monitor policy shifts closely and diversify investments across companies that are less vulnerable to these changes.

• Technology Risk

Emerging clean energy technologies may face performance or cost challenges. So, you can consider investing in firms with more established technologies and balanced R&D portfolios. It will safeguard you against potential technology failure.

• Financial and Operational Risks

Financial health, execution delays, or operational inefficiencies of companies can hurt returns. Mitigation requires an in-depth analysis of the financial strength and project pipelines. This ensures strong management and transparent governance in the long run.

• Liquidity Risk

Low market liquidity in clean energy funds often leads to price instability and buying/ selling challenges. To navigate this challenge, consider allocating only a small portion of the portfolio and selecting funds that are bigger and more active.

Taxation on Clean Energy Mutual Funds 

If you start SIP investments in a clean energy mutual fund and hold the units for less than 12 months, you will be liable to pay a 20% tax rate. In this case, your profit will be considered as Short-term Capital Gains (STCG). The previous tax rate for this profit was 15%.

For any investment returns you wish to withdraw after holding the units for 12 months, you can claim tax-free redemption of profits up to ₹1.25 lakh. Under the new tax structure, any profits above this threshold will be taxed at a rate of 12.5% if the units are held for 12 months or more.

Final Words 

As India steadily transitions toward renewable energy, clean energy mutual funds give investors a chance to benefit directly from this megatrend. These funds combine growth prospects with diversification. However, they also carry sector-specific risks. 

A disciplined strategy, balanced asset allocation and regular monitoring can help you use clean energy mutual funds effectively for long-term wealth creation.

If you are looking to save regularly and are confused about which one to choose? Start investing in RD with Stable Money and avail a seamless investment process and 8.40% interest rate!