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5 Mutual Funds That Focus On Environmental, Social, And Governance (ESG) Investing

This blog covers the Top 5 Mutual Funds for investors who focus on investing their money in Environmental, Social, and Governance (ESG) Funds that will help grow their investment portfolio to achieve their financial growth.
April 18, 2024

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“ESG” stands for Environmental, Social and Governance Monitoring. ESG investing is a way of investing in companies based on their commitment to one or more ESG factors. It is also commonly referred to as sustainable investing, socially responsible investing, and impact investing. Environmental, Social and Governance (ESG) investing is used to screen investments against company policies and encourage responsible corporate action. Many mutual funds, brokerage firms and robo-advisors now offer investment products that use ESG principles. Sustainable investing is one of the trendiest and most popular types of investing today. Let's take a look at some of the best socially responsible mutual funds that will help you improve your portfolio. 

Below mentioned are the top 5 Mutual Funds That Focus on Environmental, Social, and Governance (ESG) Investing. However, we at Cube Wealth suggest you consult a financial advisor or a Cube Wealth Coach before investing in any assets because entry and exit to such thematic funds need to be precise. It is pertinent to have the necessary knowledge and expertise before investing in them.

1. Aditya Birla Sun Life ESG Fund.

The Aditya Birla Sun Life ESG Fund Direct Growth has been there from 24 Dec 2020 and the average annual returns provided by this fund is -0.72% since its inception. This is an open ended thematic equity scheme investing in companies following ESG theme where it will follow a bottom-up approach for portfolio construction. The fund is suitable for Long term Equity Investors with an Investment horizon of 5 years and above.

  • Risk: Medium
  • 1-Year Returns: 4.5%
  • AUM: ₹835.33 crores

2. Axis ESG Fund.

Axis ESG Fund scheme seeks to generate long term capital appreciation by investing in a diversified portfolio of companies demonstrating sustainable practices across Environmental, Social and Governance (ESG) parameters. Axis ESG Fund is suitable for investors who have advanced knowledge of macro trends and prefer to take selective bets for higher returns compared to other Equity funds. At the same time, these investors should also be ready for the possibility of moderate to high losses in their investments even though the overall market is performing better. You may also see a Cube Wealth Coach or download the Cube Wealth app to effectively implement these tactics and accomplish long-term financial objectives.

  • Risk: Medium
  • 1-Year Returns: 4.5%
  • 3-Year Returns: 15.6%
  • AUM: ₹1,537.18 crores

3. ICICI Prudential ESG Fund.

ICICI Prudential ESG Fund is Open-ended Thematic-ESG Equity scheme which belongs to ICICI Prudential Mutual Fund House. The investment objective of the fund is that the scheme seeks to generate long-term capital appreciation by investing in a diversified basket of companies identified based on the Environmental, Social and Governance (ESG) criteria.

  • Risk: Medium
  • 1-Year Returns: 4.5%
  • AUM: ₹1,263.36 crores

4. SBI Magnum Equity ESG Fund (G)

SBI Magnum Equity ESG Fund is Open-ended Thematic-ESG Equity scheme which belongs to SBI Mutual Fund House. The scheme seeks to provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of companies following Environmental, Social and Governance (ESG) criteria.  Before adopting any investment strategy, it's advisable to download the Cube Wealth app and consult a Cube Wealth Coach who can provide guidance based on your risk tolerance.

  • Risk: Medium
  • 1-Year Returns: -2.1%
  • 3-Year Returns: 17.2%
  • 5-Year Returns: 10.6%
  • AUM: ₹4,456.46 crores

5. Quantum India ESG Equity Fund (Growth)

Quantum India ESG Equity Fund Direct - Growth is a Thematic-ESG mutual fund scheme from Quantum Mutual Fund. This fund invests in companies that are focused on conserving the environment, on positively impacting communities that they operate. The scheme seeks to achieve long-term capital appreciation by investing in shares of companies that meet Quantums Environment, Social and Governance (ESG) criteria.

  • Risk: High
  • 1-Year Returns: -2.1%
  • 3-Year Returns: 17.2%
  • 5-Year Returns: NA
  • AUM: ₹61.25 crores

FAQs

1. How many ESG mutual funds are there in India?

ESG funds are funds that allocate their entities to corporate actions assessed on environmental, social and governance criteria. The operations of these companies are highly sustainable and attractive to investors. Mutual fund regimes with an environmental, social and governance (ESG) focus have yet to take off in India.

Although there are only 10 funds out there with collective assets of Rs 10,803 crore under management.

 

2. What are the best ESG funds in India?

Based on their returns the three best ESG funds in india are:

1. SBI Magnum Global Fund: SBI Magnum Global Fund invests in large-cap companies across the globe that follow good ESG practices. The aim of this scheme is to provide the investor with the opportunity of long-term capital appreciation by investing in a diversified portfolio composed primarily of MNC companies.

2. Mirae Asset Nifty 100 ESG Sector Leaders Fund of Fund: Mirae Asset Nifty 100 ESG Sector Leaders FoF - Regular Plan is Open-ended Thematic-ESG Equity scheme which belongs to Mirae Asset Mutual Fund House which seeks to provide long-term capital appreciation from a portfolio investing predominantly in units of Mirae Asset ESG Sector Leaders ETF.

3. Invesco India ESG Equity Fund (G): The fund is an open ended equity scheme investing in companies following Environmental, Social and Governance (ESG) theme. The scheme seeks to generate capital appreciation from a diversified portfolio of Equity and Equity Related Instruments of companies which are selected based on ESG Criteria.

3. What are ESG focused funds?

ESG investing can also be called sustainable investing. It is an umbrella term for investing in companies that employ ethical practices for profit. ESG investors will not invest in stocks of companies that fail to meet certain environmental, social or corporate governance standards. For example, a chemical company that pollutes heavily or a company with poor labor practices. In recent years, ESG investing has gradually become popular around the world, as many investment funds have started adopting this model.

4. What are the largest ESG funds?

Below mentioned are some of the  largest National as well as International funds in ESG funds on the basis of their market size but they cannot assure you with guaranteed returns on your investments.

1. iShares ESG Aware MSCI USA ETF

Mirroring the performance of the greater market, this ETF follows the MSCI USA Extended ESG Focus Index, which avoids businesses that produce civilian firearms, controversial weapons, tobacco, thermal coal, and oil sands - thus strengthening its sustainability values.

This ETF, with its top holdings such as Apple, Microsoft, and Amazon, makes an ideal anchor position for those who intend to invest in sustainability without disproportionately increasing their risk level. As long as the fund meets its goal, you can expect similar returns to that of an S&P 500 Index Fund.

2. SPDR S&P 500 ESG ETF

The SPDR ETF is a newly created fund, though it follows the S&P 500 ESG Index, which for 10 years now has consistently surpassed the S&P 500, its ‘conventional’ counterpart, the S&P 500. While Apple, Microsoft, and Amazon make up the top three holdings in both this fund and the iShares ESG Aware MSCI USA ETF, they are weighted slightly higher in this particular fund.

3. Fidelity U.S. Sustainability Index Fund

Fidelity's index fund follows the MSCI USA ESG Leaders Index, composed of companies with exemplary ESG ratings. It also excludes any company incorporating alcohol/tobacco production or gambling activities, as well as nuclear power plants and firearms. 

4. Nuveen ESG Mid-Cap Growth ETF

This fund deals with mid-sized, US-based companies that have experienced significant growth in earnings and sales per. While it does not include Apple or Amazon, there are plenty of familiar names, such as Burlington Stores, Pinterest, Etsy and GoDaddy. The focus on smaller yet rapidly growing firms offers investors promising opportunities.

5. Calvert International Responsible Index Fund

With over 800 stocks from multiple countries, this fund ensures a diversified portfolio. Japan has the highest concentration of 18.5%, followed by the U.K, France and Switzerland with 12%, 8.3% & 8.3%, respectively. 

Conclusion

As the world increasingly recognizes the importance of sustainable and responsible investing, mutual funds focusing on Environmental, Social, and Governance (ESG) criteria have gained prominence. The five mutual funds discussed in this guide offer opportunities for investors to align their financial goals with ethical, environmental, and social values. These ESG-focused funds not only have the potential to deliver financial returns but also promote positive change in areas like climate action, social equity, and corporate responsibility. When considering ESG mutual funds, it is essential to weigh your values, financial objectives, and risk tolerance. ESG investing can be a powerful tool to contribute to a better future while building wealth.

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