Over the past few years, renewable energy mutual funds have steadily gained popularity in India. As climate awareness grows and sustainability becomes more than just a buzzword, many investors are looking to align their money with environmental and social impact. In response, several asset management companies have launched funds focused specifically on renewable energy and ESG themes.
Between 2020 and 2023, ESG mutual funds saw their assets under management grow by more than 50 percent. This surge was supported by strong post-COVID market recovery, global sustainability commitments, and increasing interest from retail as well as institutional investors.
But after such a sharp rise, it is natural to pause and ask an important question. Is there still value left in ESG and renewable energy funds? Have the best gains already been captured, or is this just the beginning of a longer structural shift?
To answer that, we need to look beyond short-term performance and examine India’s long-term renewable energy roadmap, policy support, and corporate participation in sustainability.
Let’s explore what the ESG landscape in India looks like today and what the future could hold for renewable energy mutual funds.
India’s Renewable Energy Mutual Funds Prospect 2026
India’s renewable energy sector is rapidly expanding, with the country aiming to achieve 500 GW of renewable energy capacity by 2030. This ambitious target makes India one of the largest global markets for renewable investments. Mutual funds focused on this sector have delivered strong long-term performance, with some achieving returns of 12-15% annually over the past 3-5 years.
Currently, India is the third-largest producer of renewable energy globally, with nearly 40% of its total installed power capacity coming from renewables. In 2023, India added 10 GW of new capacity, primarily from solar and wind projects, further enhancing the appeal of renewable energy mutual funds. Global investors, including sovereign funds and private equity players, have shown increased interest, contributing over $75 billion to the sector since 2015.
Top 5 Performing Renewable Energy Mutual Funds in India 2026
ICICI Prudential ESG Exclusionary Strategy Fund
This fund primarily invests in companies that meet environmental, social, and governance (ESG) criteria, excluding those involved in harmful sectors such as tobacco or fossil fuels. It focuses on responsible investing while promoting sustainability and ethical practices.
SBI ESG Exclusionary Strategy Fund
SBI’s ESG fund applies an exclusionary strategy, avoiding investments in companies that have a negative impact on the environment or society. The fund prioritizes businesses with a strong commitment to ESG practices, offering a balance of ethical and sustainable growth.
Quantum ESG Best In Class Strategy Fund
This fund takes an “ESG best in class” approach, investing in companies with superior ESG performance within their sectors. It aims to deliver sustainable returns by choosing environmentally and socially responsible companies that are also financially strong.
Tata Resources & Energy Fund
Focused on the resources and energy sectors, this fund invests in companies involved in energy production, natural resources, and renewable energy mutual funds. It leverages India’s growing focus on renewable resources while providing exposure to traditional energy sources.
DSP Natural Resources and New Energy Fund
This fund invests in a combination of natural resources and emerging energy technologies like renewables. It offers diversification by blending traditional energy investments with newer, more sustainable options, catering to the evolving energy landscape.
SBI Energy Opportunities Fund
This fund focuses on energy sector investments, emphasizing opportunities in both traditional and renewable energy. It seeks to capitalize on India’s growing energy demands and the transition toward cleaner energy solutions.
| Fund Name | Category | AUM (Cr) | 1 yr Return | 3 yr Return | 5 yr Return |
| ICICI Prudential ESG Exclusionary Strategy Fund | Sectoral/Thematic | 1651 | 42.05% | 16.77% | – |
| SBI ESG Exclusionary Strategy Fund | Sectoral/Thematic | 6111.6 | 31.54% | 12.17% | 16.93% |
| Quantum ESG Best In Class Strategy Fund | Sectoral/Thematic | 94.6 | 29.26% | 11.91% | 18.64% |
| Tata Resources & Energy Fund | Sectoral/Thematic | 1062.56 | 35.13% | 14.16% | 24.44% |
| DSP Natural Resources and New Energy Fund | Sectoral/Thematic | 1335.59 | 46.34% | 19.03% | 24.16% |
| SBI Energy Opportunities Fund | Sectoral/Thematic | 11,717.96 | – | – | – |
Conclusion
ESG and renewable energy mutual funds have delivered strong returns in recent years, but it is important to remember that no theme is risk-free. This is still a developing sector. Policy changes, shifts in government incentives, evolving regulations, and rapid technological advancements can all impact performance. Market sentiment toward global climate policies can also create short-term volatility.
That said, the broader structural story remains compelling. India has set ambitious renewable energy targets, is expanding solar and wind capacity, and continues to attract global capital into green infrastructure. As one of the fastest-growing major economies, India is expected to play a significant role in the global energy transition.
For investors, the key is perspective. ESG thematic funds are not meant for short-term trading. They are better suited for those who believe in the long-term transformation of the energy and sustainability landscape and are comfortable with periodic fluctuations.
If you have a long investment horizon and a relatively higher risk appetite, renewable energy mutual funds can offer an opportunity to participate in India’s shift toward a greener economy while aiming for long-term wealth creation.
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Disclaimer: Investments in securities market are subject to market risks, read all the related documents carefully before investing. The securities are quoted as an example and not as a recommendation.
