12 key Indian mutual funds score zero on climate scenario analysis and stress testing. Should you be worried?

The bulk of India’s $900-billion asset management sector does not disclose how portfolios would withstand climate shocks, leaving investors in the dark, a new study shows.

Twelve mutual funds—accounting for more than 80% of the industry’s assets— scored zero on climate scenario analysis and stress testing, said the report by think tank Climate Risk Horizons. None revealed how a rapid transition to clean energy, delayed action, worsening physical hazards or stranded projects would impact valuations and returns.

Indian asset managers are outliers globally on climate stress testing. Roughly two-thirds of their Asian peers disclose at least some level of scenario analysis, and the practice is even more widespread among the world’s biggest firms. The gap is consequential for India, where rising heat and humidity alone could put as much as $250 billion of annual output at risk by 2030, according to McKinsey & Co.


Investors need to “understand where the risk sits, how it affects investment value and what fund managers are doing about it”, said Sneha Yadav, a sustainable finance analyst at Climate Risk Horizons and lead author of the study.

All 12 firms had some form of stewardship framework and climate or ESG (environmental, social, and governance) oversight, yet none disclosed the emissions financed through their investments. The think tank suggested regulations for stricter disclosures, testing of portfolios against climate impact and a plan to manage it.

Asset managers have a fiduciary responsibility to act on risks that are financially material and “climate risk is obviously one”, said Sagar Asapur, Head of Sustainable Finance at Climate Risk Horizons. “We are already seeing physical weather events such as El Niño impact company earnings.”