These are the early days for ESG funds in India, says Dhirendra Kumar
What is VR's take on ESG (Environmental, Social and Governance) funds?
- S Nagarajan
ESG, as a concept, is real and understandable, as environmentally sustainable companies do hold promise. Although this concept is at its nascent stage in India, it has turned into a big thing worldwide. Several funds are pouring into these ESG funds and they are getting channelised. However, the popularity of this concept is affecting many companies; especially the ones which are relatively low on the ESG scale. For instance, ITC is a great company with a long history but foreign investors have exited this stock simply on account of environmental issues or the kind of ESG matrix that the company follows.
ESG is a big thing for foreign portfolio investors and it has already affected those companies which are relatively low on the ESG scale. They have either become completely out of favour or have been substantially deprived of the money coming from such funds, which are big.
Since ESG funds are good for humanity, it should be good for the investor in terms of being aligned with their need to generate superior returns. But again, these are the early days for ESG funds in India.