Performance Evaluation Of ESG Funds In India – A Study

Abstract

Use of environmental, social and corporate governance (ESG) scores as investment selection criteria is gaining recognition throughout the world. It is claimed that companies complying with the ESG mandates are likely to deliver a sustainable performance over long term and hence, investors looking for attractive opportunities for long term investments should certainly consider investment products such as mutual fund schemes built around the ESG philosophy. Following its global peers, India also have joined the bandwagon of ESG investing in the fields of mutual funds. Since the thematic sector is yet to be explored fully, investment in this category is expected to provide lucrative return in the years to come. In this context, the present article attempts to investigate the growth of ESG funds in India as well as to analyze the performance of existing funds in the category. The study finds a phenomenal growth of these funds in terms of number of schemes, average AUM and inflow. Based on risk adjusted performance metrics, the study reveals that majority of the funds have beaten the market portfolio in 2021 as well as for the period since inception.