Six new funds launched in five months. That’s the speed at which India’s sustainable investing bandwagon is moving.
Till October 2020, India had just three ESG (environmental, social, and governance) funds. ICICI Prudential Mutual Fund launched its sustainable offering the same month; by February 2021, American investment management firm Invesco’s ESG fund had become the sixth new fund to be launched since then. Some of the other entrants also include Kotak ESG Opportunities Fund and Aditya Birla Sun Life ESG Fund.
With that, India’s assets in sustainable funds stood at Rs 9,670 crore ($1.3 billion) as of February. Clearly, everyone wants in on the pandemic-fuelled responsible investing boom.
However, that’s barely a drop in the bucket when you look at global trends. Assets in sustainable funds globally rose 50% to $1.7 trillion $1.7 trillion Financial Times ESG funds defy havoc to ratchet huge inflows Read more in 2020, according to data provider Morningstar. And given that India’s is still more than twice as much as a year ago, interest in ESG funds in India is undoubtedly tracking the global trend.
You’d be forgiven for thinking that by choosing ESG funds, you’re putting money in a bunch of clean power producers, electric vehicle companies, and lithium-ion battery makers. Things are a lot more complicated than that, especially if you’re in India.
The glaring disparity between India and the global trends can be attributed to choice. Or the lack of it.
Funds in the US and Europe can choose from publicly listed cleantech companies, such as American EV maker Tesla. “US and Europe have a wider range of companies,” says Ruchit Mehta, who manages SBI Magnum Equity ESG Fund, the oldest and largest of Indian sustainable funds. “ESG funds there have the ability to distinguish themselves.”
And environmental factors, while just one-third of ESG investing, have put wind in the sails of responsible investing during the pandemic. “Everyone looks at governance and social factors. But some of the biggest risks are going to be around companies’ carbon footprint,” says Abhay Laijawala, managing director of Avendus Capital Public Markets Alternate Strategies. Avendus runs an ESG PMS PMS PMS Portfolio management services, targeted at institutions or high net-worth individuals, offer an investment portfolio of stocks, fixed income, debt, and structured products fund.
The looming climate risk was the focus of the recent annual letter letter BlackRock Larry Fink's 2021 letter to CEOs Read more from Larry Fink, the chief of BlackRock, the world’s biggest asset manager, to business leaders.
