Investors still warming up to ESG-focussed funds; asset base drops by Rs 2,020 cr in FY23 – EQ Mag
New Delhi: Sustainable or ESG (environmental, social, and governance) fosussed mutual funds, which are in a nascent stage in India, have seen their asset base declining by Rs 2,020 crore in fiscal 2022-23 even as experts hope such funds will attract greater attention in coming years. ESG investing is gaining traction globally, and India is also witnessing an increased awareness and interest in sustainable and responsible investment practices. At present, there are 12 mutual fund schemes in India having ESG as their theme.
“With growing concerns about environmental and social issues, coupled with regulatory initiatives to promote ESG investing, the demand for ESG funds is expected to rise in the future. As more investors recognize the potential for both financial returns and positive impact, ESG funds are likely to attract greater attention and witness further growth,” Gopal Kavalireddi, Research Head of FYERS, said. Kaustubh Belapurkar, Director – Manager Research, Morningstar India, also believes that investors’ interest in ESG funds will increase on growing awareness towards such funds in coming years. However, flow is expected to remain muted for sustainable funds in the current financial year given that ESG investing is still in its nascent stage, he added.
According to data compiled by Morningstar India, 12 ESG funds together clocked assets under management (AUM) of Rs 10,427 crore in March 2023, which was Rs 2,000 crore or 16 per cent lower from Rs 12,447 crore registered a year earlier.
In comparison, the assets base of the ESG funds stood at Rs 10,998 crore in March 2021 and Rs 3,605 crore in 2019-2020.
The decline in the AUM in FY23 in ESG funds could be attributed to several factors such as overall market sentiment and investor preferences shifting towards other investment options during the given period. Additionally, investors may have opted for profit-taking or rebalancing their portfolios, reducing investments in ESG funds, Kavalireddi said.
Source: PTI
