Home / Markets / India ESG funds AUM expands 4 times to Rs11,800 cr in two years

India ESG funds AUM expands 4 times to Rs11,800 cr in two years

ESG Funds are fast becoming a core element of financial portfolios where investors are putting their money into companies that demonstrate ethical practices across heads of Environment, Social and Governance.Premium
ESG Funds are fast becoming a core element of financial portfolios where investors are putting their money into companies that demonstrate ethical practices across heads of Environment, Social and Governance.

  • The Nifty ESG Index has outperformed benchmark Nifty (in the past one year), signifying rising attractiveness of ESG- themed funds. This bodes well for launches of ESG-theme-based funds in the country that boost AUMs under such funds

MUMBAI: Rising awareness among investors has led to a whopping surge in assets under management (AUM) of domestic sustainable or environment social and governance (ESG) funds. Over the past couple of years, not only has the value of AUM risen, but also the number of ESG funds in India, said Edelweiss Securities.

The brokerage firm said ESG AUM surged four times to Rs11,800 crore as of June from Rs2,400 in June 2019.

“According to our research, there are ten domestic ESG funds in India with AUM of Rs11,800 crore as on June 2021. Out of these funds, eight were launched in the past one year," it said in a report.

SBI Magnum Equity ESG fund (reclassified and repositioned as SBI Magnum Equity ESG Fund in May 2018) is the oldest among all, with an AUM of Rs3,900 crore in June 2021. This fund accounts for 32% of overall AUM of domestic ESG funds. It is followed by Axis ESG Equity Fund launched in February last year, with an AUM of Rs1,900 crore. HSBC Global Equity Climate Change Fund of Fund and Invesco India ESG Equity Fund were launched in March this year.

“The Nifty ESG Index has outperformed benchmark Nifty (in past one year), signifying rising attractiveness of ESG- themed funds. This bodes well for launches of ESG-theme-based funds in the country that should further expand AUMs under such funds," Edelweiss said.

Quoting Global Sustainable Investment Review 2020 (GSIR), which maps sustainable and responsible investments across the world, Edelweiss said the launch of India ESG funds has significantly contributed to rising ESG awareness among retail investors.

The report showed that global Sustainable Investment (SI) grew 15% to $35 trillion in 2018–2020, where US accounts for 48% of the pie. It spotlights seven SI strategies wherein ESG integration remains the largest deployable strategy, followed by negative/exclusionary screening (NES) and corporate engagement and shareholder action (CAS).

Globally, retail investors’ interest in SI has steadily risen over the past couple of years: from a retail mix of 11% in 2012 to 25% in 2020. Four global developments--the Paris Agreement, Sustainable Development Goals (SDG), Task Force on Climate-Related Financial Disclosures (TCFD) and United Nations Environment Programme Finance Initiative (UNEP FI)--have fuelled SI, it added.

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