Socially Responsible Investing (SRI) has come to India via ABN AMRO Mutual Fund.
Socially Responsible Investing refers to an investment strategy that combines working towards a financial return without compromising on the social good. Investments will only be made in those companies that fulfil certain conditions. These conditions could be that they are environmentally responsible or do not dabble in businesses that have an ethical issue like manufacture of arms or liquor or tobacco. However, the ABN AMRO Sustainable Development Fund will not focus on these subjective ethical issues but on objective parameters like the environmental and social performance of the company.
Which companies?
The stocks to be considered comprised the 500 in the S&P CNX 500. CRISIL partnered with ABN AMRO MF to come up with stocks within this list.
CRISIL framed 100 questions to cover the social parameters and another 100 to cover the environmental issues. Based on how the company scored against these questions, a score was given. Finally, the list was narrowed down to 245 companies.
The investment team of the fund will only look at these 245 companies to invest in. They will do the financial analysis and pick up stocks that they believe will give a good return. So even if CRISIL gives one stock a very good ESG rating – referring to its environmental and social governance - but the fund manager feels that it will not make a good investment for other reasons, then they will not invest in that stock.
The fund then back tested these 245 stocks over a period of six years (December 2000 – 2006). The return worked out to 31% p.a. over these years.
ABN AMRO has 24 such funds in Europe, Asia and Latin America. The Sustainable Development Fund, launched in India, is the 25th.
In a nutshell
Type of fund: Close-ended, diversified equity, investing across market caps
Tenure of fund: Three years
Issue opened: March 5, 2007
Issue closes: March 30, 2007
Cost per unit: Rs 10
Minimum investment: Rs 5,000
Fund Manager: Prateek Agrawal
Benchmark: BSE 200
Entry load: Nil
Exit load: Nil (unless you exit before maturity)
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