Assets of ESG funds rise 5x in four years to Rs 12,450 crore, shows data

The assets under management of funds linked to the environmental, social and governance (ESG) theme have seen a fivefold jump in the last four years.

The data from Morningstar India shows that the fund size of ESG funds stood at Rs 12,447 crore as of March 2022, up from Rs 2,268 crore in March 2019.

In the last few years, several fund houses have focused on launching ESG-based funds, to tap into the growing investor interest for sustainable investing. Typi­cally, these funds invest in companies that are focused on conserving the environment, positively impacting communities that they operate in, and conducting business ethically.

Kaustubh Belapurkar, director — manager research, Morningstar India, says, “Globally, flows into sustainable funds continues at a rapid pace, with assets in sustainable funds globally exceeding $2.7 trillion as of December 2021.  It’s still early days in India from an ESG perspective, but with the launch of ESG funds in the last few years, there are investable options available for investors. Acknowledging the growing interest around the globe for sustainable investing, the regulator is also looking to frame regulations around sustainable investing and disclosures.”

On an average ESG funds have given returns of around 22 per cent in the last one year, compared to returns from the Sensex of 19.9 per cent. SBI Magnum Equity ESG Fund has assets of over Rs 4,582 crore as of March 2022, while Axis ESG Equity Fund has fund size of around Rs 1,897 crore, shows the data from Morningstar India.

Despite ESG funds attracting investors attention, ESG funds have seen some outflows in the last financial year. Sustainable funds witnessed outflows of Rs 315 crore in the financial year 2021-22 (FY22), down compared to Rs 4,884 crore in FY21.

“Investors are yet to fully warm up to the concept of sustainable investing. We have observed that most flows into sustainable funds so far have come in during the NFO period. FY21 witnessed significant inflows as there were several ESG Fund launches,” added Belapurkar.