ESG funds in India, which focus on Environmental, Social, and Governance criteria, are gaining traction as investors prioritize sustainability alongside returns. These funds align with the nation’s net-zero goal by 2070, per IBEF. What are ESG funds, and how can investors leverage them? Let’s break it down.
What Are ESG Funds?
ESG funds in India are mutual funds that invest in companies based on strong Environmental, Social, and Governance (ESG) practices. As global awareness around climate change, corporate ethics, and sustainable development grows, Indian investors are increasingly drawn to responsible investment strategies.
These funds aim to deliver long-term value—not just financial returns, but also positive social and environmental impact. In India’s evolving financial landscape, ESG investing has become a key theme, especially among millennials and institutional investors.
Why ESG Investing Matters:
Sustainable investing is no longer a niche concept. Indian investors—especially millennials and Gen Z—are increasingly aligning their portfolios with their values. ESG funds allow you to invest in companies that are not only profitable but also socially and environmentally responsible.
For example, a company that reduces its carbon footprint, ensures ethical labor practices, and follows transparent governance standards may qualify for inclusion in an ESG portfolio.
Moreover, SEBI (Securities and Exchange Board of India) has issued guidelines for ESG disclosures to ensure companies provide reliable data. Learn more at SEBI. This adds an extra layer of accountability to ESG investing.
How These Funds Work?
ESG funds in India follow a screening process to select companies that meet certain sustainability criteria. Fund managers use ESG scores and independent audits to evaluate companies based on:
- Environmental: Carbon emissions, energy efficiency, waste management
- Social: Employee welfare, diversity, community impact
- Governance: Board independence, transparency, anti-corruption policies
These funds typically belong to large-cap or multi-cap categories, and many follow international ESG benchmarks. Some well-known ESG mutual funds in India include SBI Magnum Equity ESG Fund and Axis ESG Equity Fund. In addition, fund houses now consider ESG risks as part of their risk management strategy. This is crucial because companies that ignore ESG issues may face legal, reputational, or regulatory risks down the line.
Should You Invest in These Funds?
If you want to grow your wealth while supporting responsible businesses, ESG funds are worth considering. However, like any investment, they carry market risks. It’s essential to assess your financial goals and risk appetite before investing.
ESG funds can be ideal for long-term investors who believe in ethical investing. They also help diversify your portfolio with quality stocks vetted for sustainability. In fact, ESG-compliant companies have shown resilience during market downturns. A 2022 Morningstar report revealed that over 60% of ESG funds outperformed traditional counterparts during volatile periods.
Conclusion:
ESG funds in India blend profitability with purpose but require diligent tax and regulatory compliance. These funds offer a smart way to align your investments with ethical and sustainable values. As India pushes towards net-zero goals and corporate transparency, these funds will likely grow faster. Ready to invest sustainably? Explore more financial insights now!
– Ketaki Dandekar (Team Arthology)
Read more about ESG Funds here – https://www.investopedia.com/esg-criteria.asp