- Date : 05/06/2023
- Read: 3 mins
A look at ESG investment options and the concept of sustainable investing
Indian investors are interested in incorporating ESG into their investment strategy
Sustainable investing can be done by debt as well as equity investors
ESG projects and stocks can give good financial returns in the future
Environmental, social and governance (ESG) investing is breaking new ground in the Indian financial scenario. Retail capital in India is expected to be mobilised towards sustainable investing in a big way.
In a 2022 Standard Chartered report, it was estimated that India has the potential to mobilise $1 trillion towards ESG investments by 2030, particularly towards climate transition. On this World Environment Day, let us look at how our investments can be linked to environmental and sustainability-related projects and companies.
Investor’s Perception of ESG Investments
The aforementioned Standard Chartered report observed that 46% of Indian investors are keen on environmental restoration. 40% of investors are willing to hedge against ESG risks and 33% want their investments to have a positive social impact.
These investors want improvements in the accessibility towards sustainable investments. Comparability and comprehensibility are other major hindrances that are stopping investors from exploring ESG investment options.
If the ESG market is well-regulated in the future, sustainable investment can be a part of an Indian investor’s portfolio.
How Can You Incorporate Sustainable Investments
It is still early days for sustainable investing in India, but you have sustainable investment options on both debt and equity sides of the market.
Sovereign Green Bond was launched by the Government of India in January 2023, in two tranches. Valued at Rs 80 billion, these bonds are available in five and ten-year tenors. The sale proceeds from green bonds are being utilised in solar and wind energy, solar irrigation pumps, green hydrogen, metro projects and afforestation. These bonds can be purchased in the secondary market through your account with your broking house.
ESG funds are thematic mutual funds that invest mostly in stocks of companies with strong ESG practices. SBI Magnum Global Fund, Aditya Birla Sun Life Advantage Fund, Franklin Build India Fund, etc. are examples of ESG mutual funds available in India.
ESG or sustainable investing fosters the inflow of retail capital onto socially responsible projects and companies. These initiatives are also expected to assume financial robustness in the future.
For instance, India’s growing energy demand, combined with the government’s towards reducing carbon emissions, will benefit sustainable projects and enterprises in the energy sector.
Investment in the clean energy sector through exchange-traded funds or mutual funds can give you professionally managed equity exposure in ESG stocks. Similarly, investors looking for a steady return can look at green bonds and directly add funds to the various ESG initiatives taken up in the country.
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