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.

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Best ESG Mutual Funds to Invest in India 2024

Fund Categories
ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedDSP Investment Managers Private LimitedIDFC Asset Management Company LimitedHSBC Asset Management(India)Private LtdCanara Robeco Asset Management Co. Ltd.Franklin Templeton Asst Mgmt(IND)Pvt LtdEdelweiss Asset Management LimitedInvesco Asset Management (India) Private LtdQuant Money Managers LimitedMirae Asset Mutual FundPPFAS Asset Management Pvt. LtdSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdMotilal Oswal Asset Management Co. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.PGIM India Asset Management Private LimitedLIC Mutual Fund Asset Management LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.Fund PineBridge Mutual FundJM Financial Asset Management LimitedBaroda Asset Management India LimitedUnion Asset Management Co. Pvt. Ltd.Principal Asset Management Private LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundWhiteOak Capital Asset Management LimitedBajaj Finserv Asset Management Limited360 ONE Asset Management LimitedBank of India Investment Managers Private LimitedITI Asset Management LimitedNJ Asset Management Private LimitedNavi AMC LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdTrust Asset Management Private LimitedHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Taurus Asset Management Company LimitedShriram Asset Management Co LtdZerodha Asset Management Private LimitedOld Bridge Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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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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