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ESG funds gained popularity after the coronavirus-induced disruptions last year. According to a report by Morningstar, ESG funds received net inflows of Rs 3,686 crore in FY21, a jump of 76% more than FY20.
ESG stands for Environment, Social and Governance, which means it helps in analysing the qualitative aspects of the company you’re investing in which might not be mentioned in their financial statements.
According to experts, companies that adhere to the ESG standards will definitely bear profits in the long run. “ESG Funds at an early stage in India right now, launch of new ESG Funds has increased awareness among investors, meanwhile domestic asset managers have also started including ESG funds in their portfolio” says Kaustubh Belapurkar, Director- Fund Research at Morningstar.
ESG Funds in India
SBI Mutual Fund was the first to launch an ESG Fund in India in 2013. After that, it took almost seven years for other ESG funds to enter the market. If we talk about performance, SBI Magnum Equity ESG Fund -D has given 57.7% returns in one year whereas Axis ESG Equity Fund – D, launched in 2020, has given 49.25% returns in a year. ICICI Prudential ESG Fund, Kotak ESG Opportunities Fund, Aditya Birla Sunlife ESG Fund are some of the others who have launched ESG Funds.
Should You Invest In ESG Funds?
Swarup Mohanty, CEO, Mirae Asset Investment Managers, believes it has given investors a chance to invest in companies that not only give high returns, but are also managed effectively and efficiently.