SEBI allows mutual funds to launch multiple ESG-based schemes
Market regulator SEBI has announced a slew of measures to boost ESG-based investing in India through mutual funds. The fund houses have been given the freedom to launch more than one ESG scheme from now.
Market regulator SEBI has announced a slew of measures to boost ESG-based investing in India through mutual funds. The fund houses have been given the freedom to launch more than one ESG scheme now.
With a total of 10 ESG funds in the market, the Indian mutual fund industry is still in the early stages of ESG investing vis-à-vis its global peers. The 10 funds currently operational in India manage total assets under management (AUM) of Rs 10,243 crore as on March 29, 2023.
Most of these schemes track the Nifty100 ESG TRI which has a total of 89 companies listed on it- a far lower number than the general indices. The Nifty100 ESG index is designed to reflect the performance of companies within the Nifty100 index based on environmental, social and governance (ESG) risk scores. The average number of stocks in the portfolios of these ESG schemes is 38-52, compared to 70-100 in a diversified equity portfolio.
Let's now look at the returns given by the category. In the last year, the category has offered an average return of -5.09 percent. In a three-year time frame, the category has offered 21.79 percent and in five years, the returns stand at 11.01 percent. The decline in returns can be attributed to the energy crisis and a global hit on the ESG framework after the Russia-Ukraine war.
In India, the top constituents by weightage in the ESG index are companies like Infosys, Tata Consultancy Services (TCS), HDFC Ltd, HCL Technologies, ICICI Bank, and Bharti Airtel. Financial services at 29.37 percent, information technology at 23.05 percent, and automobile and auto components at 10.76 percent represent the biggest sectors on the index.
Also Read: SEBI tells mutual funds they cannot double-charge fund investors in the name of total expense ratio
When it comes to top performers in the last three years, Quantum India ESG fund with 26.98 percent returns and SBI Magnum Equity ESG fund with 24.42 percent returns have topped the return charts.
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