ESG Funds

What are ESG Funds?

ESG stands for environmental, social, and governance. Any organization that is performing well in this scenario and is hoping to continue to maintain this development in the future, has to be ESG compliant. These funds usually allocate assets in shares and bonds of those companies that are evaluated on various factors based on environmental, social, and corporate governance criteria. Under this approach, the investors don’t just evaluate and screen the company’s financial performance but also the environmental, social, and governance aspects and practices. This makes it important for not only the community welfare but also the environment and sustainability.

The ESG criteria reflect the organization’s culture, involved risk, and management aspects, along with performance. ESG funds are suitable for those investors who are looking to invest in those companies which are sustainable and conscious about the management aspect of the environment.

ESG Criteria

The ESG approach not only focuses on the regulatory methods, but rather emphasizes the fact that companies must implement environment-friendly methods in their operations. This will thereby help and promote sustenance and management. The pandemic has tremendously put up the perspective of sustainable investing.

ESG factor – Environmental

This ESG factor majorly includes the contribution made by any private or government company in the field of climate change either by waste management, efficient energy usage, or any other sustainable practice.

ESG factor – Social

This ESG factor includes various human rights, linked with the supply chain or any other process/operation of the company, not limited to illegal child labor or occupational hazards.

ESG factor: Governance

This ESG factor refers to protocols or a set of rules defining responsibilities and roles of various levels of stakeholders in the governance of the company. This thus helps and promotes sustenance and management.

Top ESG Funds in India

Fund name	Top Holdings	Fund size
SBI Magnum Equity ESG Fund	Infosys, HDFC Bank, TCS, ICICI Bank, Bharti Airtel, L&T, Axis Bank	3922.43 crore
Axis ESG Equity Regular Growth	Avenue Supermart, Bajaj Finance, Kotak Mahindra Bank, Wipro, Nestle, Info Edge, HDFC and Torrent Power	1917.42 crore
Kotak ESG Opportunities Fund	HDFC, TCS, Infosys, ICICI Bank, Bharti Airtel	1701.23 crore
Aditya Birla Sun Life ESG Fund	Infosys, Axis Bank, HDFC Bank, Bajaj Finance, State Bank of India	973.04 crore

1. SBI Magnum Equity ESG Fund

This fund is CRISIL 1-star rated, one of the top ESG funds, and is also the oldest fund of this category. SBI Magnum Equity ESG Fund has more than 90 percent of investments in Indian stocks, which makes it unique of all. This fund offers SIP at a minimum investment of 500 rupees and has a fund size of about 3922.43 crore. The fund has its hold on Infosys Ltd., HDFC Bank Ltd., TCS Ltd., ICICI Bank Ltd., L&T Ltd., and others. The expense ratio of this fund is over 2%.

2. Axis ESG Equity Regular Growth

Axis ESG Equity Regular Growth fund has 71 percent of its investment in Indian stocks, out of which about 52% is in large-cap stocks, 9.5% in mid-cap stocks, and about a percent in small-cap stocks. The fund has its holding on Avenue Supermarts Ltd., TCS Ltd, HDFC Bank Ltd., Bajaj Finance Ltd., Kotak Mahindra Bank Ltd., and others. The expense ratio of this fund is around 2.11% with a minimum SIP investment option of Rs 1000.

3. Kotak ESG Opportunities Fund

Kotak ESG Opportunities Fund is one of the top ESG funds in India, with about 98.12% of its investments in Indian stocks, out of which 58.7% invests in large-cap stocks, about 18.97% in mid-cap stocks, and 12% in small-cap stocks. Fund size is Rs 1701.23 crore with its holding on HDFC Ltd., TCS Ltd., Infosys Ltd., ICICI Bank Ltd., Bharti Airtel Ltd., and others with an expense ratio of 2.03%. The minimum SIP in this fund is Rs 1000.

4. Aditya Birla Sun Life ESG Fund

The fund size of this ESG fund is about 973.04 crore rupees. This Fund has 99.17% of its investment in Indian stocks out of which 49.01% deals in large-cap stocks, about 25.75% is in mid-cap stocks, and 9.93% in small-cap stocks. The fund has its holding on Infosys Ltd., Axis Bank Ltd., HDFC Bank Ltd., Bajaj Finance Ltd., State Bank of India. The expense ratio of this fund is about 2.25% with a minimum SIP option at Rs 1000.

Frequently Asked Questions (FAQs)

1. What is an ESG fund?

ESG stands for environmental, social, and governance. These funds usually allocate assets in shares and bonds of those companies that are evaluated on various factors based on environmental, social, and governance criteria. ESG funds are suitable for those investors who are looking to invest in those companies which are sustainable and conscious about the management aspect of the environment.

2. Are ESG funds a good investment?

Amid this pandemic, these funds emerged as one of the best performing funds in India, due to the importance of sustenance and environment management approach in operations. Thus, yes, these funds have tremendously put up the perspective of sustainable investing.

3. What is an ESG strategy?

The ESG strategy (environmental, social, and governance) reflects the organization’s culture, involving risk, and management aspects, along with performance. These funds usually allocate assets in shares and bonds of those companies that are evaluated on various factors based on environmental, social, and governance criteria.

4. Which are the top performing ESG funds in India?

Top-performing ESG funds in India include:

SBI Magnum Equity ESG Fund
Axis ESG Equity Regular Growth
Kotak ESG Opportunities Fund
Aditya Birla Sun Life ESG Fund