Environmental, social and governance funds are rising to fame—but are they right for your investment portfolio?
Despite growing awareness of sustainable investing, market experts say that there are several challenges such as compliance costs and market alignment, particularly for smaller businesses, though they believe that ESG funds in India hold immense potential.
SEBI has made changes in disclosure requirements for ESG funds. There have been many instances of confusing, ambiguous, and incomplete disclosures related to green fund names, their goals, screening criteria, and impact claims
Exposure to AI now represents a “short-term risk to investors,” said Marcel Stotzel, a London-based portfolio manager at Fidelity International.
The top ESG-focused companies in India include Tata Consultancy Services (TCS), Tata Power, Infosys, HDFC Bank, ICICI Bank, Wipro, and JSW Steel, said report by Avendus Capital
Under the current regulatory requirements, mutual funds are permitted to launch only one scheme with ESG investing under the thematic category for equity schemes.
Goldman funds registered as promoting environmental, social and governance goals under European Union rules sold about 11.7 million shares in Adani companies in February, according to data compiled by Bloomberg.
Apart from making it mandatory for the largest 1,000 listed companies (by market cap) to make ESG disclosures as per BRSR from FY23, SEBI has carved out a special ESG category among mutual funds. Fund houses can now launch multiple funds, focussing on a variety of ESG parameters within a single category
The five new categories should be exclusions, integration, best-in-class and positive screening, impact investing and sustainable objectives.
The firm manages at least four funds that have clean-energy or ESG in their names.
Going forward, ESG considerations will become an integral part of the overall investing framework for asset managers in India, experts said.
Do ESG funds justify the hype?
Analysts said investors were reluctant to put cash into ESG funds as most funds in the sector were new and could not show a track record of outperformance.
NTPC is transforming itself into a green warrior through a slew of programmes that will substantially increase its share of renewable energy generation
Covering everything from how a company handles climate change or boardroom diversity to how a country is positioned to withstand the impact of changing weather patterns, the belief is that those with a good ESG score will perform better over time.