In a first for India, three former Tata group executives have tied up with a mutual fund to launch a USD 1 billion corpus to invest in companies doing good on environment, social and governance fronts.
The fund will be a joint venture, owned equally by the three ex-Tata executives -- Mukund Rajan, Govind Sankaranarayanan and Alan Rosling -- and Quantum Advisors, and will invest in listed companies.
"We will invest between USD 40-50 million in each company to take a meaningful stake and work like a private equity fund which is very deep association to drive the change we envisage," Sankaranarayanan told PTI over phone.
He said the fund will reach out to long-term capital sources like pension funds, insurance companies and university endowments willing to stay invested for over five years at least.
The initial close of the fund may be lower, but the overall corpus being targeted is USD 1 billion, he said, without giving a definitive timeline by which the fund will be operational.
The fund will drive change in a company's working through various means which may not necessarily include a board seat, he said, adding that it will also undertake policy advocacy and commission research reports on relevant subjects.
Sankaranarayanan hoped even though the fund will invest in fewer companies, the benefits accruing to the investee companies should lead others to adopt the best of the practices.
He also hoped that the trio's background of working with the Tatas, perceived to be socially conscious group, will help the fund raising. Rajan had served as Tatas' brand custodian, chief ethics officer and a member of the group executive council during Cyrus Mistry's chairmanship, while Sankaranarayanan was chief operating officer for Tata Capital and Rosling was Tata Sons director.
ESG is a very popular theme of investing to improve companies' performance on responsible practices in all the three areas globally, but there are no funds focused on the aspect in India.
"This pool of capital in the fund will act as a catalyst to force businesses to think hard about their choices and offers a viable path to promoters who wish to add value to the communities they work in and long-term benefits to their shareholders," Quantum's Ajit Dayal, who will lead the investment team, said.
The fund will seek to demonstrate that driving beneficial ESG outcomes delivers strong financial returns and that, in India as elsewhere, you can do well and outperform by doing good, the statement said.