Mutual Funds esg-sustainable-investing-indian

ESG and sustainable investing in Indian MFs

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ESG (Environmental, Social, Governance) investing has emerged as a significant theme in Indian mutual funds, with multiple AMCs offering ESG-themed equity schemes. The category has grown from negligible AUM in 2018 to substantial industry attention by 2025, driven by global ESG-investing trends, SEBI’s ESG disclosure framework , and broader Indian corporate-governance focus.

Indian ESG MF landscape

ESG-themed schemes

Notable Indian ESG schemes:

  • Quant ESG Equity Fund.
  • Mirae Asset ESG Sector Leaders ETF.
  • Axis ESG Equity Fund.
  • ICICI Prudential ESG Fund.
  • Aditya Birla Sun Life ESG Fund.

Common methodologies

ESG schemes vary in methodology:

  • Negative screens: Exclude companies in tobacco, weapons, gambling, certain fossil fuels.
  • Positive screens: Focus on companies leading on ESG metrics.
  • Best-in-class: Include leaders within each sector.
  • Integration: Apply ESG analysis within broader investment process.

Regulatory framework

Per ESG disclosure framework for mutual funds :

  • Phased SEBI mandate from 2022 to 2024.
  • ESG-themed schemes must disclose detailed methodology.
  • All AMCs disclose ESG considerations in investment process.
  • BRSR Core integration for portfolio-level ESG metrics.

ESG scoring

Methodologies vary:

  • Third-party ESG scoring (MSCI ESG, Sustainalytics, FTSE Russell).
  • AMC’s own ESG framework.
  • Hybrid approaches.

This methodology variation limits direct cross-fund comparison.

Drivers

Global

  • ESG mainstreaming in developed-market fund management.
  • Climate / sustainability focus.
  • Stewardship engagement requirements.

Indian

  • BRSR Core disclosure framework.
  • Increasing investor demand.
  • ESG as quality-screen (good governance correlates with returns).

Concerns

  • Greenwashing: Some schemes overstate ESG credentials.
  • Methodology opacity: Hard to verify claims.
  • Limited Indian universe: Not all Indian listed companies have strong ESG data.

See also

External references

References

  1. AMFI public records and industry data.
  2. SEBI (Mutual Funds) Regulations 1996.
  3. Indian financial press coverage.

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