Three former Tata group executives have tied up with Quantum Advisors, a mutual fund, to launch a $1 billion environment, social and governance (ESG) fund to invest in listed entities.
ESG is a very popular theme of investing to improve companies' performance on responsible practices in all the three areas globally, but there are no funds focused on the aspect in India.
The fund will be a joint venture chaired by Mukund Rajan, who had served as Tatas' brand custodian, chief ethics officer and a member of the group executive council during Cyrus Mistry's chairmanship, and will be joined by former Tata Capital chief operating officer Govind Sankaranarayanan and Tata Sons director Alan Rosling.
"In comparison with other markets, the need and opportunity for higher ESG standards in India are enormous," an official statement said.
The fund will take a private equity approach while investing, which entails deeper engagement with the management to influence strategy to enhance ESG performance.
It will take "meaningful stakes" in listed midcaps to advance the ESG agenda.
"This pool of capital in the fund will act as a catalyst to force businesses to think hard about their choices and offers a viable path to promoters who wish to add value to the communities they work in and long-term benefits to their shareholders," Quantum's Ajit Dayal, who will lead the investment team, said.
The fund will seek to demonstrate that driving beneficial ESG outcomes delivers strong financial returns and that, in India as elsewhere, you can do well and outperform by doing good, the statement said.
However, other details of how the joint venture plans to go about raising the fund and timelines were not shared.