There is a growing awareness about moving towards a sustainable future. It might something as simple as using smarter alternatives to plastic, carpooling, conserving water, etc. Similarly, it’s important to understand where your savings are invested. Are the companies in your portfolio making sustainable choices regarding the future or are they solely focused on gaining profits? Irrespective of the rising popularity of these funds, you may be having concerns - whether ESG investing is a bubble? Is it just another Fad?
ESG in its essence comprises non-financial issues that are material to the business earnings and valuation making them important consideration for your long-term investments. It stands for ‘environmental, social and governance’ criteria mutual fund companies use to screen companies. More About ESG Investments
How companies interact and help with issues with the planet, including climate change, carbon emissions, recycling, water stewardship.
How they manage relationships with employees, suppliers, customers and communities – for example, Privacy & Data security, Corporate social responsibility, gender parity, worker rights and inclusion.
How companies treat minority shareholders, leadership issues, executive pay, internal controls and business ethics and fraudulency cases. Lack of Standardization in ESG investing
One key challenge that companies and investors face is that data on ESG investing is currently subjective, though moving towards standardization – it is difficult to objectively define a ‘good’ ESG Fund. Today, ESG like beauty lies in the eye of the beholder. How do you as investors assess whether the ESG funds are true to label?
Here are key questions to ask when looking at an ESG fund: 1. What methodology does the fund use to screen companies?
It’s not the PE multiple (Price to Equity), or valuation or market cap that matters. Understand whether the fund is a true to label mutual fund and sticks to its fundamentals of environmental, social and governance criteria when evaluating underlying stocks. 2. Does it beyond the desk to actively research companies in its portfolio?
Choose ESG funds that go beyond BRSR (Business Responsibility and Sustainability Reporting) reports to a more holistic 360 degree on ground research 3. What is the fund track record?
Since ESG investing is a relatively new concept, it would be better to stick with funds that have been longer in the ESG space. 4. Does it form part of your long term investments?
This is probably one of the most important questions. ESG investments like other equity mutual funds are meant for long term investors. The longer you hold the mutual fund units, the better your chances for long term risk adjusted returns. Reasons to invest in Quantum India ESG Equity Fund
1.Resilient returns amidst economic uncertainty
2.Sustainability = Profitability
3.Proprietary ESG scoring methodology
4. Governance sits at the heart of our methodology
5. One of the first in the ESG funds space
6. Complements your Equity Portfolio
With rising inflation, fiscal deficit, increased market uncertainty, it’s important to become more and more conscious about the impact these macroeconomic uncertainties have on the company’s business.
Since ESG is a relatively new concept, it’s advisable that you completely understand it before investing. You can start by allocating 15% of your equity portfolio to Quantum India ESG Equity funds
. As you get more comfortable with ESG investing, you could increase your exposure if desired. *Please note the above is a suggested fund allocation only and not as an investment advice / recommendation.
See how it forms part of your diversified portfolio as part of Quantum’s Proprietary Asset Allocation Strategy
Strengthen your equity basket with Quantum India ESG Equity Fund
and make it future ready for the next downturn.
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