ESG Funds and its impact
ESG
E: Environmental
S: Social responsibility
G: Corporate governance
Usually an investor looks at financial parameters before
investing in any company but now they started looking at non-financial
parameters associated with climate, environment which drives their decision to
invest in a particular company or not.
There are 3 parameters that investor look for:
Environmental
·
In this decade there has been an increase in
average global temperature, rivers getting polluted and deforestation rising
causing huge problems for the upcoming generation
·
So investors want to invest in companies those
are switching to renewable resources, improves their waste management
practices, or curbing their emission levels.
Social responsibility
·
Companies should handle the resources in an
optimal manner where they work. The concept simply is that If you are taking
from environment or society, you have to give them back
·
Companies should not involve in any activity
that cause harm to natural environment
·
In India, it’s a law that you have to pay 2% of
your company profits for CSR i.e. corporate social responsibility activity
Corporate governance
·
It’s all
about honesty and integrity of management
***So now let’s look at ESG fund and its impact on industries
and are there any ESG funds exist in India***
ESG Fund
ESG fund is a type of mutual fund where fund will invest in
companies that will score high on 3 parameters i.e. E,S,G discussed above
Some Indian ESG funds are as follows:
·
ICICI ESG fund (announced in September 2020)
·
SBI Magnum Equity ESG
·
Axis ESG
·
Quantum India ESG
Global markets have so far 3300 ESG funds with $41 trillion
in it
Prospects and Impacts
·
Indian millennials are getting much more conscious
about Climate change and they will start investing in companies that are good
at ESG parameters
·
Tobacco companies will suffer a big hit as well
as coal electricity based firms.
We will cover impact of Climate change on Insurance industry
in the upcoming article.
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Stay Tuned
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