In the era of Kovid-19, the focus has increased on companies which have taken responsibility in the parameters of ESG and also expect huge profits.
A new category in mutual funds that is attracting investors is ESG. Investment in these funds has increased by 76 per cent in FY 2021. These Sustainable Funds have invested Rs 3,686 crores in the last financial year whereas in FY 2019-20 it was Rs 2,094 crores. According to the Morningstar report, the demand for such funds has increased in the midst of the Corona crisis.
What are ESG funds?
ESG stands for Environment, Social and Governance. That is to invest only in companies that follow the right practice on these scales. Whose governance is being taken care of by employees, companies who are fulfilling their moral responsibility towards the society and who are also aware of the harm being done to the environment and are taking steps in that direction.
Experts believe that there is a possibility of fast growth in the same companies in the future, which are expanding business based on these parameters and its effect is also seen on their earnings.
According to Kaustabh Belapurkar, director and manager (research), Morningstar India, “ESG funds are still in the early stages in India. The awareness of investors has increased with the launch of new ESG funds. At the same time, domestic asset managers are also incorporating the principle of ESG into their investment strategy. ”
How much is ESG funds in India and how is it performing?
The ESG category is new compared to the rest of the category but there is a lot of investor interest in it. The oldest ESG fund in India is that of SBI Mutual Fund. This fund was launched in January 2013. After this, it took 7 years for the other funds of this category to come. Many ESG funds made their debut in the year 2020.
Of these, SBI Magnum Equity ESG Fund Direct Plan (SBI Magnum Equity ESG Fund -D) has given 57.57% return in a year, while Axis ESG Equity Fund – Direct Plan (Axis ESG Equity Fund – D) launched in February 2020. Has given 49.52 percent returns.
Apart from these, ICICI Prudential ESG Fund, Kotak ESG Opportunities Fund, Aditya Birla Sun Life ESG Fund are present in the market, although there is not enough data to review their performance as they have been launched only for 6-8 months.
Is it right to invest in them?
Swaroop Mohanty, CEO of Mirae Asset Investment, believes that the focus on such companies has increased in the era of the Kovid-19 epidemic. For companies which have worked responsibly towards employees and society, there will be more opportunities for growth in future as there will be no problems in their business.
According to Swaroop, the trend towards these companies has increased among investors as there is an opportunity to invest only in companies with good management without compromising on the returns of the fund. According to Swaroop Mohanty, ESG funds have outperformed the market during the epidemic. They believe that big companies also have to follow ESG parameters to be sustainable in future.
