Nifty ESG beats Nifty50 in last one year as Indians take to conscious investing

More and more Indians are turning conscious investors with rising awareness about the environment, social and governance (ESG) theme. And to tap into this, a slew of mutual fund houses have launched funds based on this concept. Axis ESG Equity Fund, HSBC Global Equity Climate Change Fund of Fund and Invesco India ESG Equity Fund are some examples.

In fact, according to research by Edelweiss Securities Ltd, as of June 2021, there are ten domestic ESG funds in India. Interestingly, out of these funds, eight were launched in the past one year. Their research further showed that over the past two years, AUM has increased exponentially by 4 times to Rs11,800 crore in June 2021 from Rs2,400 crore in June 2019. It should be noted that the SBI Magnum Equity ESG Fund is the oldest among all with AUM of Rs3900 crore in June 2021; this fund alone accounts for 32% of overall AUM of domestic ESG funds.

This optimism has rubbed off on the Nifty ESG index as well. In the last one year, the Nifty 100 ESG index has outperformed the key Indian benchmark Index Nifty 50, by posting returns of 51%. The latter has risen 47% in the same time span.

The Nifty 100 ESG index comprises stocks from across sectors such as Infosys Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd and HDFC Ltd among others. Financial services sector has a weightage of 28.31% in this index and is followed by the IT sector.

While the ESG theme is still at a nascent stage in India, globally it is one of the most sought-after investment themes, especially in a post-Covid world. The Global Sustainable Investment Review 2020 report showed that over 2018–20, global sustainable investing AUM rose 15% to USD35.3 trillion, accounting for 35.9% of total professionally managed assets, up 55% since 2016. Canada reported the highest growth of 48% in sustainable investing, followed by the US and Japan, showed the report.