ESG stands for Environment, Social and Governance. These are the 3 main areas representing the pillars of sustainable investment. Many MF companies are either launching a new fund under this category and many are changing old funds to this new style. Let us see ESG Investing meaning & funds in India investing as per ESG investment principle.
What is ESG Investing?
The term ESG was first coined in 2005 in a landmark study entitled “Who Cares Wins.”
Today, as a theme ESG based investing accounts for almost a quarter of all assets managed in the world, ~ US$20 trillion (Source: Bloomberg). Means Rs 25 comes under ESG if Rs 100 is invested!.
In investments, it was pioneered by the former UN Secretary-General Kofi Annan. His goal to initiative & find ways to integrate ESG into capital markets (investments).
The theme of ESG covers a wide gambit of responsible investing across major economically and socially important factors of society.
The ESG investing advocates investing in companies or funds which follow prudent policies in these 3 domains viz:
Environmental Issues: Climate change and carbon emissions, Biodiversity, Air and water pollution, Deforestation, Energy Efficiency, Waste Management, Water conservation.
Social Issues: Customer satisfaction, Data Protection & Piracy, Gender and diversity, Employee Engagement, Community Relations, Human Rights, Labour Protection.
Governance Issues: Composition of Board Members, Fair treatment to minority shareholders, Audit committees setting process, Lobbying rules, Bribery & corruption dealing, Political contributions & Whistleblower policies & protection.
Does ESG Investments Benefit Investors?
Yes in 2 ways. Ethically & Returns-wise. Let me show you how…
Ethical Investing or Responsible Investing:
Do you know your portfolio may have a company whose main business is selling cigarettes?
You might be holding a company’s shares who just shut down its plants in wake of slowdown and fired labors in thousands?
The company in your portfolio may be engaged in open-pit mining by clearing jungles & fertile land.
Being investor is one side, but if you have option to invest in companies sensitive to these areas… would you like to invest?
ESG Funds in India can help you.
Returns-wise
Axis MF just launched a new scheme Axis ESG Equity fund and they have an interesting slide in their presentation.
ESG is not magic. It is a simple science.
If a company is managing itself on the ESG parameters, it can have more profits in the long term. So an investor can get more returns with peace of mind.
Asset Managers around the world have recognized the need to incorporate ESG into their decision-making process.
ESG Investing in India
In India, many mutual fund companies operate with foreign partners. ESG although started abroad but thanks to these partners, it has reached Indian Fund Managers.
Kotak Mutual fund was first to sign the UN-supported Principles for Responsible Investment (PRI) – a global network of investors that attempts to integrate ESG practices into investment practices.
4 more investment management firms from India are signatories to PRI till date. These are Kotak MF, ICICI MF, Quantum MF & SBI MF.
On fund side, SBI MF had changed its fund SBI Magnum SBI Magnum Equity Fund changed to become SBI Magnum Equity ESG Fund, a thematic fund investing in companies that follow the ESG norms. They get benefitted with insights from their JV partner Amundi.
Similarly Quantum MF also follows ESG investment through its fund – Quantum India ESG Equity Fund. The fund was launched in July 2019.
Performance of ESG funds in India
(as on 8th Jan, 2020)
| Scheme Name | NAV | Corpus (in Crs) |
Min. Investments |
Investment | 1 Month | 3 Months | 6 Months | 1 Year | 2 Year | 3 Year | 5 Year |
| Quantum India ESG Equity Fund – Regular (G) | 10.54 | 13.29 | 500 | REGULAR | 1.74 | 6.14 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| SBI Magnum Equity ESG Fund (G) | 112.53 | 2615.22 | 1,000 | REGULAR | 1.42 | 7.48 | 3.95 | 14.91 | 8.38 | 13.23 | 9.74 |
| Quantum India ESG Equity Fund – Direct (G) | 10.56 | 13.29 | 500 | DIRECT | 1.73 | 6.24 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| SBI Magnum Equity ESG Fund – Direct (G) | 118.69 | 2615.22 | 1,000 | DIRECT | 1.50 | 7.70 | 4.38 | 15.69 | 9.37 | 14.22 | 10.66 |
Should you follow ESG Investing?
Yes, why not?
ESG does not have a say on the company’s age. So it can be a new company or an old giant. it can be small, medium or a large company.
ESG filter, in fact, help you invest in companies with good management. In our country, talking about the pedigree of management is still in the formative stage. ESG helps you invest in quality companies.
Soon, you will have many more choices to invest in ESG based funds. Till writing ICICI Pru MF & Kotak have filled for approval for new schemes based on ESG investing. We will keep you updated.
Any questions?
Feel free to ask in the comments section below or through my email madhupam@thewealthwisher.com.
