Nilanjan
If you are looking for a smart way to grow your money while also supporting the causes you care about, you need to pay attention to this.
The Securities and Exchange Board of India (Sebi) has just announced a game-changing decision that will open up new opportunities for investors who want to invest in ESG (environmental, social, and corporate governance) funds.
ESG funds are mutual funds that invest in companies that follow high standards of environmental, social, and corporate governance practices. These companies are more likely to have a positive impact on society and the planet, as well as lower risks and higher returns.
But until now, ESG funds in India were limited in their scope and variety. There was only one sub-category of ESG funds under the thematic category of equity schemes, and the investment criteria were strict.
That’s all about to change.
Sebi has allowed mutual funds to launch five new categories of ESG funds under the thematic category of equity schemes. These are:
- ESG Sectoral Funds: These funds will invest in companies from specific sectors that have high ESG scores.
- ESG Thematic Funds: These funds will invest in companies that focus on specific themes related to ESG, such as clean energy, water conservation, gender diversity, etc.
- ESG Index Funds: These funds will track the performance of an index that is based on ESG criteria.
- ESG ETFs: These are exchange-traded funds that will track the performance of an ESG index.
- ESG Fund of Funds: These are funds that will invest in other ESG funds.
These new categories will give investors more choice and flexibility to invest in ESG funds according to their preferences and goals. They will also increase the competition and innovation among fund houses to offer better products and services to attract investors.
But that’s not all.
Sebi has also made some important changes to the disclosure and reporting requirements for ESG funds. These include:
- Enhanced voting disclosures: ESG funds will have to disclose whether they supported or opposed any resolution due to any environmental, social, or governance reasons. This will help investors understand how their money is being used to influence corporate decisions.
- Security-wise BRSR Core scores: ESG funds will have to disclose the BRSR (Business Responsibility and Sustainability Reporting) Core scores of each security they invest in. The BRSR Core score is a measure of how well a company is performing on various ESG parameters. This will help investors compare and evaluate different companies and funds based on their ESG performance.
- Name and score of ESG Rating Providers: ESG funds will have to disclose the name and score of the ESG Rating Providers (ERPs) that provide the ESG scores for the securities they invest in. ERPs are agencies that assess and rate companies based on their ESG practices. This will help investors verify the credibility and quality of the ESG ratings.
These changes will make ESG funds more transparent and accountable to their investors. They will also help investors make more informed and responsible investment decisions.
So what does this mean for you?
It means that you have a golden opportunity to invest in ESG funds now and reap the benefits later.
ESG funds are not only good for your conscience, but also for your wallet. Studies have shown that ESG funds tend to outperform conventional funds over the long term, as they avoid investing in companies that face higher risks of regulatory penalties, reputational damage, or operational disruptions due to poor ESG practices.
ESG funds also offer you a chance to align your investments with your values and support the causes you care about. By investing in ESG funds, you can contribute to solving some of the biggest challenges facing humanity today, such as climate change, social inequality, human rights violations, etc.
But you need to act fast.
The demand for ESG funds is growing rapidly, as more and more investors are becoming aware of their benefits and potential. According to a report by Morningstar, the assets under management (AUM) of ESG funds in India grew by 76% in 2020-21, reaching Rs 15,725 crore as of March 31, 2021.
This trend is likely to continue, as Sebi’s new regulations will make ESG funds more accessible and attractive to investors. As more money flows into these funds, their prices will rise accordingly. This means that if you invest in them now, you can get them at a lower cost and enjoy higher returns later.
So don’t wait any longer.
If you want to make a fortune by investing in ESG funds now, you need to take action today.
Here’s what you need to do:
- Find out your risk appetite and investment horizon. ESG funds are suitable for investors who have a moderate to high risk appetite and a long-term investment horizon of at least five years.
- Choose the ESG fund category that suits your preference and goal. You can opt for any of the five new categories of ESG funds that Sebi has allowed, depending on your interest and objective. You can also diversify your portfolio by investing in more than one category of ESG funds.
- Select the ESG fund that matches your criteria. You can compare and evaluate different ESG funds based on their performance, BRSR Core scores, ESG ratings, fees, etc. You can also consult a financial advisor or use an online platform to help you make the right choice.
- Start investing in the ESG fund of your choice. You can invest in ESG funds through various modes, such as lump sum, systematic investment plan (SIP), systematic transfer plan (STP), etc. You can also switch from your existing conventional funds to ESG funds, if you wish.
That’s it.
You are now ready to make a fortune by investing in ESG funds now.
But remember, this opportunity won’t last forever.
The sooner you invest in ESG funds, the better.
So don’t delay.
Start investing in ESG funds today and secure your future while making a difference in the world.
