Avendus launches India's first ESG Fund; to focus on top 100 cos by market cap

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26 Aug, 2025 12:21

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The Avendus India ESG Fund made its maiden investment on February 1, marking the first time a fund of this kind has been launched in India.

ESG stands for environment, social and governance.

The fund will invest $1 billion and takes into account India's top 100 companies by market capitalisation.

"We hope to raise the money in the next one year," Abhay Laijawala, the Fund Manager and Managing Director, Avendus Capital Public Markets Alternate Strategies, told Moneycontrol.

The list of 100 companies is filtered to 50. "The list is further shortened to 25 companies after we do a fundamental evaluation of the firms," said Chief Executive Officer Andrew Holland.

"Everyone is moving towards governance. Especially given the developments of the past six months," he added, talking about the scope of the fund.

Corporate governance issues have plagued some of the most well known Indian companies, including ICICI Bank, Yes Bank, Axis Bank, Sun Pharma and IL&FS. The new fund hopes to give a differentiated opportunity to investors looking for companies that comply with sustainability standards.

While a new concept in India, the ESG concept has found a taking internationally. Studies say 26 percent of total assets globally are managed under sustainable responsible investing. This amounts to $22.9 trillion, up from $13.6 trillion in 2012.

Earlier this month, three ex-Tata Group veterans, along with  Ajit Dayal's Quantum Advisors, announced the formation of India's second ESG fund, which will also invest $1 billion in Indian companies. The fund will focus on mid-cap companies.

Difference in evaluation

"There is a critical difference between the traditional way of evaluating companies and the ESG framework," said Laijawala.

"Traditionally, it is about companies and their shareholders. But under the ESG framework, it's about all stakeholders - shareholders, employees, regulators, suppliers and customers. When you do an analysis of a company based on this, you are capturing the risk factors; and at the same time, looking at opportunities that may not reflect in valuation done the traditional way," he added.

The Fund has tied up with Institutional Investor Advisory Services (IiAS), an independent rankings advisor, who has put in place a ranking framework covering ESG principles.

"We have looked at several reporting guidelines. And have identified certain criteria and how to measure each one of them, and have a scoring mechanism," said Amit Tandon, Managing Director of IiAS.

Citing an example, Tandon explained: "For instance, we may look at a company's waste management policy. Does it have a policy, does it disclose information? If they have a policy, then it's fine. If they don’t, then they score zero. The other part is to look at the efficacy."

Seventy percent of the investors will come from overseas and will include pension funds. "In India, the investors will include high net worth individuals, family offices and corporate treasuries...On offshore, we expect the first investments to come in by April," said Holland.

The Fund will be benchmarked against the Nifty 100. Its advisory board includes former RBI deputy governor Rakesh Mohan.