What are ESG funds?

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On the lines of foreign countries, now a new theme of mutual funds is gaining momentum in India- ESG’s, wherein E stands for Environment, S for Social and G for Governance. The foundation of ESG investment rests on the way companies operate rather than the profits of the companies. ESG schemes seek out shares of companies that adhere to the principles of environmental, social and corporate governance.

There are currently 11 ESG funds in India, most of which have been launched in the second half of 2020 and 2021. ESG scheme is a better way to measure the sustainability of companies. The hidden risk is measured in the way companies do business. Experts believe that companies whose management adopts these principles have the potential to increase earnings in the future. The theme is new and the ESG scheme currently covers only large cap shares. So, where does it fit into your investment portfolio? Kaustubh Belapurkar, Director Research, Morningstar India in an exclusive interaction with Money9 shares insights on ESGs.