Flavour of the Season for Indian Mutual Fund Industry ?
What are ESG Funds ?
ESG stands for Environment Social and Governance. The portfolio constitutes of stocks of companies who have a sustainable business model.
If a company meets all the criteria of Environment, Social and Governance Standards, they are said to be ESG compliant. The Fund Manager will consider both Financial and ESG factors, before making them part of the portfolio.
Apt for investors that are looking to invest in companies that are sustainable and conscious about the environment. Inflows to these schemes up 76% in FY21.
ESG Score
Score (0 - 100) to know whether a company is environmentally and socially sustainable or not.
Importance
India is becoming more aware and conscious about Climate Conditions. Possibility of Companies paying heavily if they do not abide by the new rules.
Inclination of Millennials towards Sustainable Issues.
A new Index- Nifty 100 ESG Sector Leaders launched by NSE.
Gaining Popularity
Companies with good ESG Scores can be expected to perform better in future with their focus on Environment and Social Issues. Good Governance and Social Responsibility not only adds to the Goodwill of the Company but also help them to avoid any altercation with the Law of the Land.
Companies maintaining a balance between Climatic Issues and Development are less likely to face heat (climatic regulations) from the Government.
Although currently the biggest challenge ESG is dealing with is lack of quality data.
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