ESG Mutual Funds
ESG mutual funds focus on investments that meet environmental, social, and governance (ESG) criteria, aiming to promote sustainability and ethical practices. These funds invest in companies that prioritize eco-friendly initiatives, social responsibility, and robust governance standards. Investors in ESG mutual funds seek not only financial returns but also the satisfaction of supporting businesses that align with their values. By integrating ESG factors into their investment strategy, these funds aim to mitigate risks and capitalize on opportunities arising from the global shift towards sustainability. As interest in responsible investing grows, ESG mutual funds continue to gain popularity among conscientious investors.
Best ESG Mutual Funds to Invest in India 2024
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Quant ESG Equity Fund Direct Growth▲ 32.51%AUM ₹279 Cr •
Expense 0.77%
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ICICI Prudential ESG Exclusionary Strategy Fund Direct Growth▲ 17.77%AUM ₹1496 Cr •
Expense 1%
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SBI ESG Exclusionary Strategy Fund Direct Growth▲ 17.3%AUM ₹5874 Cr •
Expense 1.3%
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Invesco India ESG Integration Stategy Fund Direct Growth▲ 16.27%AUM ₹552 Cr •
Expense 1%
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Aditya Birla Sun Life ESG Integration Strategy Fund Direct Growth▲ 15.69%AUM ₹680 Cr •
Expense 1.33%
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Kotak ESG Exclusionary Strategy Fund Direct Growth▲ 15.52%AUM ₹1013 Cr •
Expense 0.76%
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Quantum ESG Best In Class Strategy Fund Direct Growth▲ 15.31%AUM ₹84 Cr •
Expense 0.84%
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Mirae Asset Nifty 100 ESG Sector Leaders Fund of Fund Direct Growth▲ 14.65%AUM ₹111 Cr •
Expense 0.07%
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Axis ESG Integration Strategy Fund Direct Growth▲ 13.45%AUM ₹1391 Cr •
Expense 1.27%
Start SIP in ESG Mutual Funds as low as Rs. 50
Daily SIP | Weekly SIP | Monthly SIP
Advantages of Investing in ESG Mutual Funds
Sustainable Investing
ESG mutual funds prioritize companies that adhere to high environmental, social, and governance standards, promoting sustainability and ethical practices. Investors can align their financial goals with their values, supporting businesses that contribute positively to society and the environment.
Risk Management
Companies with strong ESG practices often have better risk management strategies. They are more likely to avoid legal issues, regulatory fines, and environmental disasters, which can lead to more stable and predictable returns.
Long-Term Performance
ESG-focused companies tend to perform better in the long run. They are often better prepared to adapt to changing regulations, market conditions, and societal expectations. This resilience can translate into sustainable financial performance over time.
Attractiveness to Investors
Increasing awareness and demand for responsible investing make ESG mutual funds more attractive to a growing segment of investors. This can drive up the demand and value of these funds.
Enhanced Corporate Governance
Companies that score high on governance metrics often demonstrate better management practices, transparency, and accountability. This can lead to better decision-making processes and improved overall performance.
Positive Social Impact
Investing in ESG funds helps support companies that are making a positive impact on society. This includes improving labor practices, fostering diversity and inclusion, and contributing to community development.
Limitations of Investing in ESG mutual funds
Limited Historical Performance Data
ESG mutual funds are relatively new compared to traditional mutual funds. This means there is limited historical performance data, making it challenging to assess long-term returns and risks accurately.
Subjectivity in ESG Criteria
The criteria for what qualifies as an ESG investment can vary significantly between fund managers and rating agencies. This lack of standardization can lead to inconsistencies and subjectivity in how ESG factors are evaluated and implemented.
Potential for Lower Diversification
Some ESG funds might have a narrower investment universe due to their specific criteria, leading to less diversification. This can increase the risk if the fund is concentrated in a particular sector or set of companies.
Performance Trade-offs
While many ESG funds perform well, there is no guarantee that they will always outperform traditional funds. In some cases, prioritizing ESG factors may lead to the exclusion of high-performing but non-compliant companies, potentially affecting returns.
Complex Evaluation Process
Assessing ESG factors can be complex and time-consuming. It requires thorough research and analysis, which can be challenging for individual investors to conduct on their own.
Impact Measurement
Measuring the actual impact of ESG investments on environmental and social outcomes can be challenging. There is often a disconnect between ESG ratings and the real-world impact of the companies included in these funds.
Points to consider before investing in ESG mutual funds
Define Your ESG Priorities
Determine which aspects of ESG (environmental, social, governance) are most important to you. This can help you choose funds that align with your values and investment goals.
Understand the Fund’s ESG Criteria
Research how the fund evaluates and incorporates ESG factors. Different funds may use varying criteria and methodologies, so ensure the fund’s approach aligns with your expectations.
Review Historical Performance
While ESG funds are relatively new, reviewing their historical performance can give you an idea of their potential returns and volatility. Compare their performance to traditional funds and relevant benchmarks.
How to Start Investing in ESG Mutual Funds with INDmoney
Now that you have understood what ESG Mutual Funds are, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.
Step 1
Download the INDmoney app and create your free investment account by completing your KYC (Know Your Customer).
Step 2
Once your free investment account is ready, you can either search for an ESG Mutual Fund or go to the mutual fund section and tap on ESG Mutual Fund from Discover All Categories.
Step 3
Choose an ESG Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, expense ratios, and underlying stocks and sectors.
Step 4
You can choose to set up a SIP in an ESG Mutual Fund or even invest as a lump sum. Once you are on the individual ESG Mutual Fund page, click from the bottom “One-time” for lump sum investment or “SIP” for a systematic investment plan.
Step 5
Choose the amount that you want to invest as SIP or Lump Sum.
Step 6
Set up payments. If you choose to set up SIP in an ESG Mutual Fund, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lump sum (one-time) then you can pay via UPI, net banking, NEFT, or RTGS.
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