6 New ESG Fund Categories by Sebi: Can Investors Benefit From It? Discover The Impact Of The Green Financing

Find out how Sebi-permitted new ESG funds can promote green financing. Discover why it will add value to emerging interests in sustainable investing!

ESG funds can promote green financing

In this post-pandemic world, investors are gradually developing an interest in value businesses. They are not only attracted to the rapid growth of their return on investment but also to environmentally responsible or green financing companies.
The Securities and Exchange Board of India (SEBI) has permitted asset management companies (AMCs) to launch six new mutual fund schemes. These new funds will be established, especially on Environmental, Social, and Governance (ESG) investing strategies.

So, is it going to be irrelevant to the investors or going to offer more valuable investment strategies to them? Let's find out with a proper understanding of the facts.

  • Fund houses are allowed to form six new different thematic investment strategies.
  • Inventors can have more clarity about the funds they are investing in.
  • It can motivate more sectors to meet the ESG criteria.
  • Investors can assess their risk tolerance better than before.

Encouraging ESG investing

The watchdog has mandated that fund houses invest at least 80% of the total AUM of the ESG fund in equity and related instruments. This decision can empower investors to consider their role in the global sustainable development goals. It can passively promote more interest in ESG schemes.

Clarity Of investing

Sebi has directed AMCs to disclose the BRSR and ESG scores of the schemes along with the ESG rating providers in the monthly statements. It will provide more clarity and transparency to the investors about the underlying instruments they are investing in. It will boost the confidence of the investors in the fund.

Also Read: Should You Invest In Non-ESG Funds With High ESG Scores For Better Returns?

Scheme options

Before the circular, AMCs were allowed to launch only one scheme in the ESG thematic mutual funds category. But this decision from Sebi enables fund managers to launch new strategic schemes for their investors.

Risk profiling

Companies with better ESG ratings are often more capable of controlling the risk of environmental regulations, labour practices or governance issues. In this way, ESG funds can be a better choice for investors than non-ESG ones.

Boosting corporate responsibility

The formation of more ESG-focused funds can encourage other non-compliant sectors to improve sustainable practices to attract more capital flow.

Also Read: World Environment Day 2023: What Is Sustainable Investing And Why It Is Getting Popular Among Indian Investors?

Sebi’s regulations and the ESG-based curated strategies of the fund managers will probably attract retail investors more in the arena. Investors, in turn, can find options for their value investing, ultimately leading to a competitive market and addressing global challenges.

Why investors are preferring ESG funds these days? How big are ESG funds?

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.


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