What is the role of ESG funds in one’s portfolio?
An ESG investor tries to achieve dual objectives, with emphasis on both, i.e., generating financial return while seeking to have a positive environmental, social and governance impact.
Following are the potential benefits that one can aim to achieve by having an ESG fund in one’s portfolio:
• The opportunity to align your investment with your values
• Globally, we have seen that in the long run, ESG funds tend to have the potential to generate higher wealth along with lower volatility
• Incentivises companies to focus not only on profit but also on planet and people
• ESG factors can be a leading indicator that may highlight any material risk that may not be evident by financial analysis
In fact, empirical studies have documented that having ESG funds has improved the overall risk–reward profile of an investor’s portfolio. Morgan Stanley analysed more than 10,000 open-end mutual funds and found out that investing in sustainability has usually met, and often exceeded, the performance of comparable traditional investments. This is both on an absolute and a risk-adjusted basis across asset classes and over time. In its latest study on the performance of sustainable funds domiciled in Europe, which is the largest market for sustainable investing, Morningstar found out that across all categories, at least 50 per cent of sustainable funds outperformed traditional funds.
All these indicate that an ESG-theme portfolio can form part of your core portfolio as such a portfolio has an option to create wealth with lower risk in the long run. Hence, by investing in an ESG portfolio, you are not only contributing to a better tomorrow by incentivising companies to incorporate ESG practices but you are doing so with the possibility of generating comparable, if not higher, wealth with lower risk. ESG is hence a noble investment strategy that scores on performance and morals.
In India, the concept of ESG is still in its nascent stage. How do you see the theme evolving in the near to long term? Also, since ESG factors are subjective in nature and there is no standardisation in India as of now, how can an investor pick the appropriate fund?
India has consistently been one of the largest emitters of greenhouse gases and it was ranked fifth most-vulnerable country susceptible to climate change among 181 countries in the Climate Risk Index 2020 as per a report published by a German watch. In the last few years, we have seen a rise in the occurrence of floods, a rise in sea levels, increase in heatwave, water contamination, etc., which are detrimental to population and the economy. As per a study conducted by International Labour Organization, India would be the most impacted country due to heatwave as more than 50 per cent of the India’s population is employed in the agricultural sector.
Continue reading your story on the app
Continue reading your story in the magazine
Cancel Your Beliefs
Unlike other stock recommendation services, Value Research Stock Advisor will return your money if you are not satisfied. Why do we do that?
Will A Merger Create Wealth For You? Here's How To Tell
The announcement of the merger between HDFC and HDFC Bank and a slew of other mergers and acquisitions in recent times have put spotlight on this space. In this cover story, we explain to you why mergers and acquisitions happen, how key M&As in the past have fared and how you can evaluate a merger. After reading this story, you will be able to understand the complexity of this process and decide what to do should your portfolio stock goes through a similar event.
Cold War II & Your Wealth
The second phase of the Cold War between the democratic and the authoritarian blocs will result in elevated inflation. Here’s how to protect your wealth.
The oil problem
Why have we not been able to solve it yet?
‘The litmus test for any M&A is long-term accretion to earnings and ROE'
NEELESH SURANA CIO, Mirae Asset Investment Managers (India) Pvt. Ltd.
Mitigating climate change
Reducing dependence on fossil fuels is the need of the hour but the world seems to be moving in the opposite direction
Busting Popular Macroeconomic Myths
Are rising rates bad for the market and is high inflation bad for quality stocks?
War And The Economy
The impact of the Russia-Ukraine war on the world economy
Your Investment Options In The Life-Insurance Space
As the LIC IPO approaches, here's how the three listed life insurers compare with each other
What you must know about LIC
LIC's IPO may hit the Street soon. Here are some facts and figures that will help you assess this insurance behemoth.
FOOD FOR Thought
All about food
THE TREE OF Life and Fertility
DR. V. RAMAKANTHA shares some insights into the science, history and mythology of the Banyan tree, also known as the Bengal Fig or Indian Fig. The Banyan is one of those mythical trees that has had an important place in the life and history of the people of India since ancient times. It is also home to many species of birds, animals, and epiphytic plants.
East Meets West
KALYANI ADUSUMILLI grew up in a minority group in the United States, straddling cultures, learning how to fit in, and later learning how to accept the traditions of her heritage. Today, she is watching her children going through the same process, shifting their cultural identity, as they head toward adulthood in the melting pot of a multicultural society.
NILANGANA BANERJEE: 2 series The 'Selves' | The Lullaby
The series Selves aims to artistically represent the psychological conflicts we face when we weigh ourselves based on socially determined of what is ideal and where we stand with the distorted and one-size that fits all defined.
Why We Are Not Responsible Toward the Environment
DR. ICHAK ADIZES is an expert in change management for organizations. Here he shares some of the reasons why companies are not changing their actions in relation to the environment, even though everyone knows we are facing an environmental crisis. He also offers simple solutions that will bring change.
Annadata Suraksha Abhiyaan
A tailor-made insurance initiative to financially secure farmers and growers against farming risks.
The FORCE Behind the FORCE
How George Lucas created Hollywood's most beloved franchise
EVERYTHING YOU NEED TO GET STARTED IN MAGNET FISHING
In addition to treasure hunting, magnet fishing has an environmental aspect-it helps to clean up our waterways.
Sorry, iPhone 6 Plus users, your phone probably can't be repaired anymore
Apple moves two older devices to 'vintage' status.
Self-Nurturing Through Nature
Secrets from a self-care sanctuary to help you find balance.