ESG funds gain traction amid Covid disruption

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The fad for investing in ESG (Environmental, Social and Governance) mutual funds is slowly catching up in India even as it remains a major trend globally.

The inflows into ESG mutual fund schemes has increased 76 per cent in the financial year-ended March 2021 at ₹3,686 crore against ₹2,094 crore logged in the same period last year.

SBI Magnum Equity ESG has the highest assets under management of ₹3,518 crore and has delivered a 54 per cent return as of March-end, according to Morning Star Research data.

Launched in 2006, the SBI Magnum Equity ESG fund was repositioned as an ESG strategy in 2018. Quantum India ESG Equity, with a relatively smaller AUM of ₹36 crore, has given a 66 per cent since its launch in 2019. Among the other six ESG funds launched in last two years, Axis Equity ESG and ICICI Prudential ESG have an AUM of ₹1,904 crore and ₹1,666 crore respectively while Kotak ESG Opportunities has ₹1,573 crore under its management as of March-end. Two passive funds of Mirae Mutual Fund have about ₹240 crore in AUM.

Increase in demand

The pandemichas accelerated the demand for sustainable investing. Global inflows into sustainable funds were up 88 per cent at $152 billion in the December quarter of last year. Europe accounted for almost 80 per cent of these inflows. In United States, inflows were up marginally at 13 per cent from 12 per cent logged in the previous quarter.

The flow in the rest of the world including Canada, Australia, New Zealand, Japan and Asia combined grew to $11 billion in December from $9 billion logged in the previous quarter.

Assets in sustainable funds hit a record high of $1,652 billion as at December-end, up 29 per cent from the previous quarter.

“Though it is still early days in India from an ESG perspective, the popularity of ESG funds is growing with series of launches and India will soon head the global way in ESG investing,” said Kaustubh Belapurkar, Manager-Research, Morningstar India.

In the years to come, ESG considerations will become an integral part of the overall investing framework for asset managers, he said.

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