MF Corner | Features and benefits of ESG investing

The term ESG has gained a lot of momentum during the pandemic and so did ESG investing. Flows into ESG funds have continued but in the recent quarter that is quarter three of calendar year 2022, these flows slowed down a bit.

Environmental, social, and governance (ESG) investing refers to a set of standards that socially conscious investors use to screen investments.

Global sustainable funds saw inflows of $22.5 billion which compares with inflows of $33.9 billion in the quarter gone by. Total assets also slipped marginally to $2.24 trillion versus $2.28 trillion in June.

But that did not stop managers from introducing new ESG products. Close to 148 new sustainable funds hit the shelves. As per the report by MorningStar, flows in the sustainable funds were better than those in broader markets.

The highest AUM is under the SBI Magnum Equity ESG Fund at almost Rs 4,700 crore, but this one really stands out in size. Axis ESG Equity, the number two fund by size has only around Rs 1,700 crore in assets. This then drops to around Rs 1,300 crore for the number 3 and number 4 fund and then the fifth largest fund by size has an AUM around Rs 1,000 crore.

Speaking to CNBC-TV18, Swarup Mohanty, CEO of Mirae Asset Invst Managers said, “ESG funds by nature tend to have slightly overweight exposure to technology and consumer discretionary sector, which are essentially seen as environmental friendly. It is in important to address that ESG funds are not immune to general macro environmental exposure.”

Talking about key features Mohanty said “ESG investing is a systemic incorporation of the environmental, social and governance factors which are material to performance and benefit to the society. It is a more holistic analysis than say traditional investing. ESG integration is often pursued as a means of improving investment performance, along with positive impact on the people and the planet.”

He added, “Majority of the Indian ESG schemes have been launched in the last couple of years. The track record essentially is very small to sort of comment or with conviction as yet.”