ESG is a new type of fund emerging in India. The strong balance sheet of companies in ESG funds offers additional investment options, given the business ethics of those companies. Given the global growth, acceptability and awareness, we will undoubtedly see strong growth of ESG funds in the future.
ESG Fund (Environmental, Social and Governance Fund)
A new type of fund has emerged in the mutual fund industry in recent years. Investors around the world are actively looking for companies that meet the criteria of Environment, Social, Governance (ESG). The search for such companies cannot be based on financial criteria just by studying the balance sheet and profit and loss statement. According to the latest available data, the global investment under the ESG concept is estimated at US $55 billion. In India, there are 10 investment funds based on this concept, seven of which have already started in the year 2021.
In India, the Securities and Exchange Board of India (SEBI), the capital market regulator, has made it mandatory for the top 100 listed companies to include a Business Liability Report (BRR) as part of their annual report on the ESG concept. The National Stock Exchange and the Bombay Stock Exchange have become members of the United Nations-sponsored Standing Stock Exchanges Initiative and have declared their commitment to promote sustainable investment through the mandatory ESG disclosure requirement of listed companies.
Performance of ESG Fund
The performance of the ESG index globally and locally has outperformed the broader market index for a long time. If you consider the global ESG investment, the investor who invested 100 dollar in the MSCI World ESG Sector Leaders Index on January 1, 2010 has increased his investment to, 4,267 on May 21, 2021. If the same investment had been made according to the broad index, it would have increased by 2,343 dollar. Similarly, investing in Indian ESG index would have yielded good returns.
At the time of establishment of the Nifty 100 ESG Sector Leaders Index (January 1, 2014), an investment of Rs.1 lakh The same amount would have risen by 13 per cent to Rs 2.47 lakh, according to the broader market index. It should also be noted here that the concept of ‘ESG’ not only performs better than the index but also reduces investment volatility.
Top 5 ESG Funds of India
| Fund Name | Fund Category | Return Per Annum |
|---|---|---|
| SBI Magnum Equity ESG Fund | Equity | 16.07% p.a. |
| Aditya Birla Sun Life ESG Fund | Equity | Not Available |
| Axis ESG Equity Fund | Equity | Not Available |
| ICICI Prudential ESG Fund | Equity | Not Available |
| Invesco India ESG Equity Fund | Equity | Not Available |
Conclusion
ESG fund is rapidly gaining popularity in India. Leading companies like State Bank of India and ICICI Prudential Mutual Fund have also started this fund. Being ESG compliant increases the reputation and credibility of the company many times over and their stability is sure to attract investors.
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