ESG parameters will become major investment decision drivers, with as much as 34 percent of total domestic investment assets going to this segment by 2051, according to a report by Avendus Capital.
As of June 2023, environment, social, governance, or ESG-focussed funds’ assets under management (AUM) grew four-fold to $1.3 billion from $330 million in 2019.
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ESG-funds operating in India
Major domestic institutional investors (DIIs) have introduced ESG-themed funds in their portfolio. They are the following:
>> SBI Mutual Fund with $610 million ESG AUM
>> Axis Mutual Fund with $181 million ESG AUM
>> ICICI Prudential Life Mutual Fund with $158 million ESG AUM
>> Kotak Mutual Fund with $134 million ESG AUM
>> Aditya Birla Sun Life Mutual Fund with $95 million ESG AUM
>> Invesco Mutual Fund with $72 million ESG AUM
>> Mirae Asset Mutual Fund with $14 million ESG AUM
>> Quantum Mutual Fund with $9 million ESG AUM
That said, within the ESG framework, 'governance' in Indian companies is gaining attention from various stakeholders.
As per the report, the corporate governance score of the BSE companies shows that there is a negative correlation between corporate governance score and stock beta, implying that better-governed companies tend to have less stock price volatility.
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What are the top ESG-focused companies in India?
The top ESG-focused companies in India include Tata Consultancy Services (TCS), Tata Power, Infosys, HDFC Bank, ICICI Bank, Wipro, and JSW Steel.
Which sectors contribute most to the ESG?
Traditionally, sectors contributing the most to ESG were banking, financial services and insurance (BFSI), IT, and Healthcare. However, recent trends show that companies linked to Industrials and Power are also transitioning towards ESG aggressively.
In the Nifty 100 ESG index, BFSI has 30.1 percent representation, followed by IT with 21 percent, consumer with 15.6 percent, industrials with 14 percent, among others.
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