Climate change is calling for everyone’s attention. The world needs to step up and move towards greener initiatives. The only way forward is change. 

A smart world requires more reliance on sustainability. Luckily, our government understands that. Therefore, the Indian ministry targets achieving  500 GW by 2030.  Globally, India is progressively moving forward. It stands at no. 4 in renewable energy installed capacity.

Transitioning to renewable energy

Renewable energy is obtained from cleaner, natural sources that are unlimited. These resources help create a positive green impact on the environment. They have reduced carbon emissions and minimal pollution. Popular renewable sources include solar, hydro, and thermal energies amongst others. 

The transition to renewable energy is much needed and is being increasingly supported by the Indian government. Many renewable energy initiatives such as the National Green Hydrogen Mission, PM Suryaghar and PM-KUSUM are in place to foster sustainable growth.

Why consider investing in these stocks?

Investing in renewable energy stocks can foster change and promote safer initiatives over harmful ones. The world is embracing renewable energy. Its market is booming and an investor can largely benefit from it by showing support.  

Renewable energy stocks are rapidly gaining popularity and can help investors earn high potential returns over their investment horizon. 

Here are 3 benefits of investing in renewable stocks:

• Environment-friendly: Evident from their nature of business, these stocks are promoting an environment-friendly approach in their operations. Investing in these stocks can be your way of extending support to the environment!
• Diversification benefits: These renewable stocks are expected to provide significant diversification benefits, as they may not be as affected by traditional market conditions.
• Long-term perspective: The future is Sustainable! You can include renewable energy stocks in your portfolio to unlock its long-term potential benefits. 

Also read: Top Investment Opportunities in Emerging Markets

Renewable energy stocks growth in India

STOCK NAME	CURRENT SHARE PRICE	MARKET CAPITALISATION (IN CR)	1 YEAR CAGR	5 YEAR CAGR
ADANI GREEN ENERGY	₹1599.00	2,60,335.75	70%	76%
JSW ENERGY	₹712.00	1,24,773.19	86%	57%
KPI GREEN ENERGY	₹792	10,395.82	125%	157%
TATA POWER	₹433.00	1,39,412.66	72%	50%
SUZLON	₹62.50	86,585.34	65%	89%

Source: Screener as on 8th November, 2024

Top 5 renewable energy stocks to invest in based on 5-year CAGR:

1. KPI Green Energy:

KPI Green Energy is a part of the KP Group based in Surat. It focuses on providing renewable power solutions through Solar and Hybrid power generation. 

Being a top player in the sustainability zone, this company has plans to expand renewable energy adoption across India. This is well-reflected in its 101.24% increase in net profit of ₹69.63 Cr for the quarter ending September 2024 as compared to ₹34.75 Cr in the previous quarter. 

An impressive 5-year CAGR of 157% shows the company is on the right path. It also announced a recent signing of Power Purchase Agreements with Gujarat Urja Vikas Limited for a total of 620 MWAC renewable energy projects.

2. Suzlon Energy:

Suzlon Energy is a global provider of renewable energy solutions. It mainly focuses on wind energy solutions alongside solar energy. 

Suzlon is committed to reaching new heights. In September 2024, it procured India’s largest wind energy order of 1166 MW from NTPC Green Energy Limited.  

With a 5-year CAGR of 89% and supportive government policies in favour of the industry, Suzlon is one of the top beneficiaries in the industry.

3. Adani Green Energy

Adani Green Energy is a large-cap contender in the renewable energy market. It is growing exponentially in Solar, wind, and hybrid energy projects. 

It envisions building a carbon-free future globally. With a huge potential of expansion and strategic global partnerships, Adani Green shows an upward trajectory. This can also be seen through its high 5-year CAGR of 76%.

4. JSW Energy

JSW Energy, is amongst the top players in the sustainability sector. It is involved in power generation, trading and transmission. 

The company has also announced plans to expand its power generation and storage capabilities to 20 GW and 40 GWH respectively, by 2030. 

JSW is already on an upward trend and is consistently announcing expansion plans.  These factors place this company at a relatively higher position. This is also evidently reflected in its high 5-year CAGR of 57% 

5. Tata Power Solar

Tata Power Solar is an influential competitor in the renewable energy sector. It builds solar power cells and modules for retail and institutional purposes. 

With its strong financial positioning, Tata Power Solar is always up for innovation and new technologies. In August 2024, the company collaborated with ICICI Bank to allow the feasible installation of solar power through attractive financing options. 

Its 5-year CAGR of 50% is reflective of the upward trajectory that it is on.

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Aspects to consider before investing in renewable energy stocks:

• Political environment: The primary factor to consider is the prevalent political environment. It is essential to have government support; backing sustainable projects and promoting greener initiatives for these stocks to prosper. 
• Market trends: It is important to study the demand for clean energy resources in the market. It should be compared to the demand for its competitors in fossil fuels. Higher demand for competitors can affect profitability scope. 
• Financial performance: Consider studying the financial attributes and potential plans laid out by the company. This gives a better understanding of the company’s future prospects and goals. 

Read Next: How to expand your portfolio with International Investments

Bottomline

With a potentially bright road ahead, investors need to capitalise on sustainable investing. This could be your way to contribute to the environment and make a meaningful impact. However, the ultimate choice of investing depends on the investor’s willingness to take risk and investment goals. Investment decisions need to be made only after careful consideration. 

FAQs:

1. Why invest in renewable energy stocks?

The renewable energy sector has vast potential. The stocks in this sector are innovative, advanced, and capable of rapid development. Investing in these stocks can unlock potentially rewarding benefits for investors. Moreover, Investing in renewable energy stocks allows you to help the environment by promoting sustainable companies. These can help foster development and contribute to a greener environment. Investors can also derive diversification benefits as these stocks are typically less affected by traditional market movements.

2. What is the best way to invest in renewable energy?

The best way to invest in renewable energy is through buying equity or bonds of stocks of companies building, using, or supporting renewable energy resources. Investors can also invest in exchange-traded funds (ETFs) that mimic the price movements of a basket of stocks focused on renewable energy. The decision to invest in any form of investment should be based on the investor’s risk tolerance and investment goals.

3. What are the risks of investing in renewable energy?

Much like other investments, renewable energy investments also face risks related to market movements where the market dynamics can impact the stock prices. These stocks are also affected by changing government regulations as the sector is evolving. There is also a risk of new technological challenges that these companies and their stock prices may face with growing competition. 

4. Is investing in renewable energy profitable?

While the profits are not guaranteed, investment in renewable energy can yield potential returns as the world is gradually moving towards promoting renewable energy. There is still an untapped potential in the market with new technologies and developments. Companies are progressively investing in sustainability, and this may lead to a gradual increase in demand for renewable energy.

5. Are there benefits to investing in renewable energy?

With a large number of companies investing in renewable energy and a rising support from the government, renewable energy stocks have the potential to provide futuristic benefits. The benefits of investing in renewable energy include the possibility of earning potential returns, positively impacting the environment, and adding a diverse range of stocks to your portfolio. Investing in these stocks can help promote a safer future.