Mutual fund investors can avoid Quantum’s new fund focused on ESG: Analysts

Investors could avoid the NFO of Quantum India ESG (Environment, Social and Governance) Equity Fund as the investment theme is still untested in India, according to investment advisors. ESG investing entails building a portfolio of companies that meet high environmental, social and governance standards. Relatively new to India, this concept is popular in global markets where fund managers have invested $22 trillion into such companies. The investment strategy of the scheme will be to invest in a basket of stocks after intensive analysis of their environment, social and governance practices/standards. The fund will be a multi-cap fund and invest in a mix of large-, mid and small-cap companies that are ESG compliant. The NFO is currently open and closes on July 5.

SBI ESG Fund is the only other fund betting on this theme. In the last one year, the fund has returned 9.65% compared to Sensex’s gains of 9.57%. “This is another variant of a diversified equity fund and only time will tell how this will work in the Indian context. Investors should stay away from themes and it is best to invest in a open-ended diversified equity fund,” says Harshvardhan Roongta, CFP, Roongta Securities.

Fund managers at Quantum believe there is strong research evidence of ESG investing delivering superior returns since companies with strong sustainability scores demonstrate better operational performance and are less risky. Quantum ESG Fund is aiming to invest in clean, sustainable and socially-responsible companies. ESG compliant companies are expected to be less risky and are in a better position to withstand economic slowdown, said analysts.