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Last Updated : Jun 15, 2019 03:08 PM IST | Source: Moneycontrol.com

WRAP: What is prompting AMCs to turn to ESG Funds?

Since inception (Jan 1991), SBI’s ESG Fund has delivered 133.36 percent returns. As on April 30, AUM stood at Rs 2,312 crore.

Himadri Buch @himadribuch
Representative image
Representative image

Asset managers hunt for new themes of investing. This need not always be pure commercial in nature. There have been ways to generate returns through niche themes as well. One such theme is the ESG.

The pioneering policy move has been UN Principles for Responsible Investment (PRI).

This has evolved into a global network of investors selecting investments ESG criteria.

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It broadly covers specific areas of marine protection, businesses in sustainable development and natural resource conservation, managements with transparent business practices.

In developed markets, it has cornered substantial more than 1/5 of investment assets. In emerging markets, it is gaining ground.

Environmental, social and governance refers to the three central factors in measuring the sustainability and ethical impact of an investment in a company or business. These criteria help determine the future financial performance of companies better.

SBI Mutual Fund already has a fund called SBI Magnum ESG Equity Fund (renamed in May 2018 from SBI Magnum Equity Fund which was launched in Jan 1991), and Quantum will be the second fund house launching on June 21 after a gap of almost 29 years.

The recent spate of corporate governance issues cropping up is increasing, this may force the mutual fund industry to launch funds based on Environment, Social and Governance (ESG) investing.

Quantum India ESG Equity Fund will be benchmarked against Nifty 100 ESG Total Return Index.

Other fund houses are also contemplating a launch of ESG Fund.

These funds invest in a diversified basket of companies, following ESG.

Since inception (Jan 1991), SBI’s ESG Fund has delivered 133.36 percent returns. As on April 30, AUM stood at Rs 2,312 crore.

In the last five years, the schemes has registered 14.37 percent returns.

According to the portfolio data on Moneycontrol, the open-ended fund has deployed 97.63 percent investment in Indian stocks as in May end, of which 93.27 percent was in large cap stocks and 4.36 percent in mid cap stocks.

ESG being a niche set of assets, the returns are likely to be different from regular benchmark indices. The cost structure of environment-oriented companies is generally low and, therefore, superior returns may be delivered, if invested in quality assets.


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First Published on Jun 15, 2019 03:08 pm
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