ESG funds (Environment, Social and Governance)
ESG criteria are a set of standards for operations of a company

Companies that follow ESG norms usually have a lower risk
In recent times, ESG funds are becoming more popular among investors. Read to know more about this ESG and ESG funds.
What is this ESG (Environmental, Social, and Governance)?
ESG criteria are a set of standards for operations of a company that help investors screen companies and potential investments that score high on these three non-financial parameters. Socially conscious investors increasingly prefer an environment-oriented company that has high corporate governance standards without compromising financial returns.
What are the ESG funds?
ESG funds are portfolios of equities and bonds that integrated environmental, social, and governance factors into the investment process. ESG fund includes securities that score high on sustainability and exclude companies that perform poorly on pollution, labor relations, and management practices. Even sovereign government bonds with poor records are excluded.
IT means equities and bonds have passed stringent tests to prove its sustainability or governance regarding its ESG criteria. That is why ESG investing is also referred to as sustainable or responsible or impact or socially responsible investing.
Understanding ESG Criteria
A corporate environment, social and governance orientation involves several factors while carrying on the company’s operation. Investors who go for value-based investments seek companies whose vision and products are oriented towards ESG criteria.
Environmental criteria look for how a company operates with concern towards nature. It includes factors like energy used in production or operation, carbon footprint and emission control, conservation of natural resources, waste management, and treatment towards animals. Companies must comply with the pollution standards as well as conservation rules and regulations of the government. These days, companies bear financial costs for non-compliance with environmental regulations.
Under the Social criteria, the company must produce products or services that influence society positively. It involves the company’s relationship with employees, suppliers, customers, and the communities where it operates. Corporate community-orientation involves socially responsible initiatives and spending on social causes and community development involving employees too.
Governance means to conduct business ethically. It deals with audits, executive pay, leadership, internal controls, and company shareholder rights. In this regard, the investors and stockholders may want to know whether the company applies accurate and transparent accounting methods and involves shareholders to vote in vital decisions taken in annual general meetings or other company meetings. The corporates with regulatory issues have to pay fines for the non-compliance of statutory obligations and governance standards.
The Indian mutual fund industry and ESG funds
Presently global pension funds and other substantive investors are directing money to ESG investing. Therefore the Indian mutual fund industry too, has rolled out new funds based on ESG investing for investors. At present, ESG funds include SBI Magnum Equity ESG, Quantum India ESG Equity and Axis ESG following the ESG investment strategy in India. However, other fund houses such as ICICI Pru, DSP, Aditya Birla, Kotak, and BNP have also submitted draft offer documents with SEBI and are waiting for approval.
Why investing in ESG funds vital?
Globally about $2.96 trillion has been invested in funds that focus on ESG. Only investors can force the corporate world to behave responsibly from a social, environmental and governance perspective. Moreover, climate change and changes in societal preferences and governance issues pose risks to corporate earnings and investors in stocks.
Companies that follow ESG norms usually have a lower risk of losses due to these factors.
Research has shown that sustainable funds perform better than non-sustainable ones. It is because sustainable companies better manage risks over contentious issues like carbon footprint, face lower regulatory or societal risks than other defaulters, and their shares would be less volatile over time with increasing value for investors in the long run.
Bottomline…
In India, the concept of ESG is still new and other than the top 100-150 companies that share ESG related data by market capitalization, minimal information is available on ESG firms. Fund houses formulated their methodologies to screen for ESG and procure data. You may invest in ESG funds for its ethics. However, for returns, you better talk to your advisor about the track record.
That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.
With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh / Enquire
Related Links:
- 10 Things to know before finding best mutual funds for SIP
- 11 Difference between stocks and mutual fund
- Advantages of mutual funds
- Analysis of Public & Private Sector Mutual Funds
- Are you prepared for your retirement?
- As an investor, what should you look into an offer document (OD)?
- Asset Allocation is Important
- Attaching goals while investing in mutual funds
- Balanced Mutual Funds in India
- Benefits of investing in mutual funds in India
- Combination of Bottom-up and Top-down Approaches
- Conservative hybrid funds
- Difference between Exchange Traded Funds (ETF) and Index Funds
- Does Mutual fund provide risk diversification?
- Dynamic Asset Allocation Funds or Balanced Advantage
- Effects of Mutual Fund on Indian Economy
- Entry load and exit load in Mutual fund
- ESG funds (Environment, Social and Governance)
- Factors influencing the investments decisions of retail investors in Mutual funds
- Gilt free Gilt mutual Funds
- Gilt Fund with a 10-year constant duration
- How do you evaluate mutual funds’ performance?
- How mutual fund systematic transfer plans or STP work
- How side pocketing works in mutual funds?
- How single mothers can secure their children’s future
- How SWP from Equity Hybrid Funds can be useful to get regular return
- How to check your mutual fund KYC status online
- How to invest online in mutual funds in India
- How to start SIP in mutual fund?
- Hybrid Funds- to enjoy the best of both equity and debt funds
- In India how to invest in mutual funds
- Investing with a Bottom-up approach in Mutual Funds
- Investing with a Top-down approach in Mutual Funds
- Know about nomination in mutual fund schemes
- Know the advantages of starting your SIP early
- Let’s talk about Equity Linked Savings Scheme (ELSS) of Mutual Funds
- Let’s talk about Venture Capital Funds
- Low Duration Mutual Funds
- Medium Duration Mutual Funds
- MF is a retail product designed to target small investors, salaried people and others
- Mistakes to avoid while investing in mutual funds
- Mutual fund distribution channels
- Mutual fund for children’s higher education
- Mutual Fund KYC How you can do
- Mutual fund past performance and consistency
- Mutual Funds & Investor Awareness
- Mutual funds and Insurance plans
- Mutual funds for Beginners
- Mutual funds strategy in bank
- Penetration / Reach of Mutual Funds in Tier-3 Cities
- Regular mutual funds over Direct plans
- Selecting a mutual fund scheme
- Selection parameters in mutual funds
- Should I opt for SIP or bulk investment?
- Start online mutual fund SIP Investments
- Taking a loan against mutual fund investments
- The common myths about Mutual fund NAV
- The difference between Mutual Fund and ULIPs
- The different types of mutual funds in India
- The investor’s perception and preference towards Mutual funds
- The Mutual Funds in India
- The number of different schemes should one invest in?
- The role of a Fund Manager in the Mutual Fund scheme
- The working of Arbitrage Mutual Funds in India
- The working of Asset Management Companies in India
- Time is Precious
- Value Investing with Value Funds
- Various types of Equity Mutual Funds in India
- What are Aggressive Growth Funds
- What are Banking and PSU Funds
- What are Capital Protection Funds
- What are children’s funds
- What are Corporate Bond Funds
- What are Credit Risk Funds
- What are diversified equity mutual funds?
- What are Dividend Yield Funds
- What Are Dynamic Bond Funds
- What are Growth Schemes?
- What are High-risk Funds?
- What are income mutual funds or income schemes in mutual find?
- What are index funds?
- What are Interval Mutual Fund Schemes?
- What are large cap mutual funds?
- What are Liquid Mutual Funds?
- What are Low-risk Funds?
- What are Medium-risk Funds?
- What are mid and small cap mutual funds
- What are Money Market Mutual funds?
- What are Multi-Asset Allocation Funds
- What are mutual fund debt funds?
- What are Mutual Fund Fixed Maturity Plans
- What are Mutual Fund Monthly Income Plans
- What are mutual fund tax benefits
- What are Offshore Funds?
- What are Overnight Funds?
- What are sectoral mutual funds?
- What are the benefits of investing in mutual funds versus directly in shares
- What are Top Performing Mutual Funds in India
- What are ultra-short term debt mutual funds?
- What happens to money invested, If a mutual fund scheme is wound up?
- What if a fund changes its strategy?
- What is a Fund of Funds (FoF) scheme?
- What is a Money Market?
- What is Equity Saving mutual Funds
- What is Floater Fund?
- What is Gold ETF
- What is NAV of mutual fund
- What is Retirement Fund
- What is SIP Top-up, and what are its benefits?
- What is tax saving mutual funds and how can it help create long term wealth
- What is the difference between an open-ended and close-ended scheme
- What should I do if fund’s poor results persist?
- When should you change your investment plan?
- Which is the best mutual fund according to your risk appetite
- Who and How are mutual funds regulated?
- Why should you consider Fund Costs?
- Why should you invest through Mutual Funds?
- Why should you monitor and review your fund
- Why SIP in Mutual Fund
- You Should Increase SIP Amount Now
- Alternative to Fixed Deposits