The mutual fund industry has seen a new category of funds emerge and take hold in recent years as investors worldwide actively seek out companies that meet environmental, social and governance (ESG) norms and not merely score well on financial metrics.

Globally, assets of sustainability-themed investing stood at over $55 trillion at the end of 2018 as per latest data available with the Global Sustainable Investment Alliance. Meanwhile, in India, these funds have seen traction only in the past couple of years with majority (seven out of 10 funds) seeing their inception in fiscal 2021.

Regulatory and stock exchange focus on ESG

In India, the Securities and Exchange Board of India (SEBI) has mandated the inclusion of a Business Responsibility Report (BRR) as a part of the annual report for the top 1,000 listed companies. Further, the National Stock Exchange and Bombay Stock Exchange have become partners of the United Nations-backed Sustainable Stock Exchanges Initiative, committing to promote sustainable investing through improved ESG disclosure requirements of listed firms.