Understanding ESG in Mutual Fund Investing

Posted On Friday, Jul 12, 2019


At present, you may have ditched the plastic bags, plastic straws and plastic cans and you’re getting your own reusable market bag to the supermarket, right? If you’ve started to become environmental friendly and care for Mother Nature, then you’d want your investments to follow the same values as well. That’s where ESG investing comes in.

What is ESG Investing all about?

ESG investing means investing your hard earned money in companies that have a positive impact on the world, without sacrificing investment returns. ESG factors though non-financial in nature, have a material impact on a company’s long-term financial health.

Following are some examples of how companies, that do not give due attention to ESG factors face adverse financial consequences:

Affected ElementIrresponsible BehaviorConsequences
WaterMany industries do not have a proper waste management system and drain the waste in fresh water which goes into rivers, canals and later into the sea.Litigation and fines
Bad reputation
Protests by community members and organizations
Negative media attention
Stalled projects
Negative impact on stock prices.
AirTo avoid high cost and expenditure, many companies still make use of traditional technologies to produce high-end products which lead to higher pollution.
LandUnchecked deforestation and mining can make the ground unsuitable for plant life.
Affected ElementIrresponsible BehaviorConsequences
SupplierWorking with low cost suppliers who employ labor in poor working conditions.Litigation, bad reputation, product boycotts, protests by community members and organizations.
Negative media attention.
EmployeePaying unfair wages or providing poor working conditions.Strikes and factory shutdowns; liabilities in case of injury or death of employee; sexual harassment cases; inability to attract and retain good talent.
CustomerUsing low quality raw materials to cut costs.Consumer complaints, refunds, fewer repeat purchases, loss of market share, bad reputation, risk of litigation.
Affected ElementIrresponsible BehaviorConsequences
Public marketsPrice and volume manipulation.Regulatory action
Litigation and fines
Bad reputation
Loss of investor trust
Negative impact on stock prices.
Financial reportingIgnorance by auditors of the financial results and red flags.
Board of DirectorsIndependent directors handpicked by the promoter.

Why should you make an investment in ESG?
When investors invest in companies that take care of environmental, social and governance factors, their investments will grow because companies who care about such values resonate with consumers and investors, have lower costs and improved operational performance, create sustainable value and enjoy corporate longevity. And businesses that don’t, end up losing their customer base, fail to attract/retain good talent, run the risk of facing litigation and regulatory actions etc.
Therefore, invest in ESG to ensure that your investments have low risk and long term sustainable performance.

ESG Investing is Responsible Investing
There’s a personal satisfaction that one gets when buying organic vegetables from the local vendor that deals in an organic market as compared to buying vegetables that look nearly half dead from a supermarket. Likewise, when you invest in companies that use renewable energy effectively, that care for their employees by providing a great workplace and who do not indulge in fraud or unethical practices, you feel positive that you are investing in companies that share the same core values that you believe in.

Introducing the Quantum India ESG Equity Fund (Q-ESG)
Companies that are focused on environmental conservation, positively impacting the communities they operate in, and conducting business ethically are the kind of companies that will find their way into the Quantum India ESG Equity Fund.
These sustainable businesses are not only environmentally and socially responsible but also make great sense as investments as we look to build wealth over the long term.

Get in touch with your relationship manager or write to us on [email protected] as we explain how making money and making a difference (to the world) can actually go hand in hand.

Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum India ESG Equity Fund

(An Open ended equity scheme investing in companies following Environment, Social and Governance (ESG) theme)
• Long term capital appreciation

• Invests in shares of companies that meet Quantum’s Environment, Social andGovernance (ESG) Criteria
Quantum Long Term Equity Fund
Investors understand that their principal will be at High Risk
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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