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Celebrate Earth Day by Investing Sustainably

22 Apr 2024 - Tushar
Reading time about 4 minutes

Earth Day, a day dedicated to environmental awareness and action, is a timely reminder to consider how our choices impact the planet. This extends to our financial decisions.

Celebrate Earth Day

ESG investing offers a powerful tool to align your investments with your values and contribute to a sustainable future.

What is ESG Investing?

ESG stands for Environmental, Social, and Governance. ESG investors consider these factors alongside traditional financial metrics when making investment decisions. Here’s a breakdown:

  • Environmental: Focuses on a company’s environmental impact, including pollution reduction, resource management, and climate change strategies.
  • Social: Evaluates a company’s social practices, such as labor standards, diversity, and community engagement.
  • Governance: Analyzes a company’s leadership, transparency, and accountability practices.

Why Choose ESG Investing?

There are compelling reasons to consider ESG investing:

  • Align Your Values with Your Investments: Invest in companies that prioritize sustainability and social responsibility.
  • Long-Term Potential: Studies suggest companies with strong ESG practices may outperform in the long run due to factors like reduced regulatory risk and brand loyalty. ([Link to a study on long term performance of ESG funds])
  • Positive Impact: Your investment choices can contribute to a more sustainable future by supporting companies that are environmentally and socially conscious.

How to Get Started with ESG Investing

  • Do your research: Explore ESG investment options like mutual funds or ETFs (Exchange Traded Funds) that align with your priorities.
  • Talk to a financial advisor: A qualified advisor can help you understand ESG investing options and create a portfolio that meets your financial goals.
  • Utilize online resources: Many investment platforms offer ESG investing tools and educational resources.

The ESG scenario in India

The ESG (Environmental, Social, and Governance) scenario in India is currently experiencing significant growth and evolving regulations. Here’s a breakdown of the key aspects:

Growth and Momentum

  • Investor Interest: ESG investing is gaining traction in India, with increasing inflows into ESG mutual funds and thematic ETFs. Nifty100 ESG Index has 13.5 % CAGR total returns since insection in April 2011.
  • Regulatory Push: SEBI (Securities and Exchange Board of India) has taken steps to promote ESG reporting. Mandatory Business Responsibility and Sustainability Reports (BRSR) for the top 1,000 listed companies enforce transparency.

NIFTY 100 ESG Index

Challenges and Considerations

  • Standardization: A unified ESG reporting framework is still under development in India, making comparisons across companies challenging.
  • Data Availability: Comprehensive ESG data for Indian companies might be limited compared to developed markets, requiring thorough research.
  • Focus on E and S: While environmental and social factors are gaining attention, governance practices might need more focus in some companies.

ESG Investing in India Through Mutual Funds

A total of 8 mutual fund schemes have AUM of around Rs. 12,480 crores as of March 2024. SBI ESG Exclusionary Strategy Fund is oldes of schemes available with more than 10 years of existenace. SBI ESG fund was able to generate returns at 14.22% CAGR over last 10 years.

Here is table of all the ESG fund with their returns for 1 year, 3 year, and 5 years.

Scheme Name AUM (Cr) 1 Year 3 Year 5 Year
SBI ESG Exclusionary Strategy Fund 5,525.30 29.34% 15.89% 14.35%
ICICI Prudential ESG Exclusionary Strategy Fund 1,406.52 39.41% 16.47%  
Axis ESG Integration Strategy Fund 1,371.79 29% 11%  
Kotak ESG Exclusionary Strategy Fund 984.25 30.21% 13.21%  
Aditya Birla Sun Life ESG Integration Strategy Fund 676.73 27.13% 12.73%  
Invesco India ESG Equity Fund 537.55 33.06% 15.84%  
Quant ESG Equity Fund 237.6 47.75% 31.2%  
Quantum ESG Best In Class Strategy Fund 80.08 29.92% 13.98%  

Celebrate Earth Day by Taking Action

This Earth Day, consider incorporating ESG investing into your financial plan. By supporting sustainable businesses, you can contribute to a healthier planet and a brighter future for generations to come.

Here are some additional resources to get you started:

Together, we can make a positive impact through our investment choices!

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