2 Green Energy Mutual Funds in 2023

Last Updated on May 3, 2023 by Anjali Chourasiya

‘Green energy’ is a term we have all heard about lately. It has become a newfound interest in the market. While the world is showing interest in sustainable solutions, several companies also support the cause and work towards green energy. This provides opportunities for investors to invest in green energy. In this article, let’s look into green energy mutual funds and factors to consider before investing in them.

Table of Contents

What are green energy mutual funds?

As the name suggests, green energy mutual funds invest in companies operating in the green energy and resources sector, i.e., the companies that generate energy from sources such as wind, solar, hydro, etc.

List of green energy mutual funds in India

Here are the few mutual funds schemes that invest in the green energy sector.

Name	Expense Ratio	CAGR 5Y (%)	CAGR 3Y (%)
DSP Natural Res & New Energy Fund	1.21	11.51	42.79
Tata Resources & Energy Fund	0.91	15.13	36.48

Note: The data mentioned here is from Tickertape Mutual Fund Screener and dated as of 28th March 2023. The parameters used to derive the data are as follows:

Category: Equity
Sub-category: Sectoral Fund – Energy & Power
CAGR 3Y – Sorted from high to low

(Considered only the funds that invest in the green energy sector)

1. DSP Natural Resources & New Energy Fund

This fund from DSP Mutual Fund was launched on 25th April 2008. The investment objective of DSP Natural Resources & New Energy Fund is to generate capital appreciation and provide long-term growth opportunities by investing in equity and equity-related securities of companies that are involved in:

Discovery, development, production, or distribution of natural resources etc.
Alternative energy and energy technology sectors, with emphasis given to renewable energy, automotive and on-site power generation, energy storage and enabling energy technologies.

The AUM (Assets Under Management) of the fund is Rs. 672.81 cr. as of 28th February 2023. The current Net Asset Value (NAV) as of 27th March 2023 is Rs. 55.33. And the minimum investment required for DSP Natural Resources & New Energy Fund is Rs. 500.

2. Tata Resources & Energy Fund

This fund from Tata Mutual Fund was launched on 28th December 2015. The investment objective of Tata Resources & Energy Fund is to seek long-term capital appreciation by investing at least 80% of its net assets in equity/equity-related instruments of companies in the resources and energy sectors in India.

The AUM of the fund is Rs. 232.18 cr. as of 28th February 2023. The current NAV as of 27th March 2023 is Rs. 27.14. And the minimum investment required for Tata Resources & Energy Fund is Rs. 5,000.

Things to consider before investing in green energy mutual funds

Before investing in green energy sector mutual funds, there are a few important factors that you should consider.

Fund objective: Understanding the fund objective to ensure it aligns with your investment objective is important.
Risk profile: Like any investment, green energy mutual funds carry some risk. You should carefully review the fund’s risk profile and assess whether it aligns with your investment goals and risk tolerance.
Performance history: You should review the fund’s historical performance, considering both short-term fluctuations and long-term trends.
Diversification: Investing in a single green energy mutual fund may not provide sufficient diversification, as the performance of a few companies or sectors may heavily influence the fund’s performance. You may combine multiple green energy funds with other investments to achieve a well-diversified portfolio.
Regulatory and policy risks: Green energy companies may be impacted by regulatory and policy changes related to climate change and energy policy. You must be aware of the potential impact of these risks on the fund’s performance.
Market trends and demand: The green energy sector is still relatively new and evolving. You should keep an eye on the market trends and demand for renewable energy and energy-efficient technologies to assess the long-term potential of their investments.

Conclusion

Overall, investing in green energy mutual funds can be a good way for investors to support sustainable practices while potentially earning long-term returns. However, investors need to do their due diligence and carefully assess the risks and potential rewards of these investments.

FAQs

What is the taxation on green energy mutual funds?

Green energy sector mutual funds come under sector equity funds. The taxation on equity mutual funds is as follows:
– Short-Term Capital Gains (STCG) – The mutual funds held for less than a year are known as STCG. These gains are taxed at 15%.
– Long-Term Capital Gains (LTCG) – The mutual funds held for less than a year are known as LTCG. If the gains are below Rs. 1 lakh, they are tax-free. If above Rs. 1 lakh, the gains will be taxed at 10% without any indexation benefit.
Also, the dividends provided on all mutual fund schemes are added to your (investor’s) income and taxed as per your income tax slab rate.

What are the benefits of investing in green energy mutual funds?

The benefits of investing in green energy mutual funds are,
– Green energy sector can beat broad market benchmarks when the sector is doing well.
– Green energy sector funds can offer you exposure to top companies operating in the green energy sector.