ESG Mutual Funds in India: Aligning Investments with Values in 2025

 

ESG Mutual Funds in India: Aligning Investments with Values in 2025

In recent years, there's been a significant shift in investment strategies, with a growing emphasis on sustainability and ethical considerations. ESG (Environmental, Social, and Governance) mutual funds have emerged as a popular choice for investors aiming to align their financial goals with their personal values.​

Performance Snapshot of Top ESG Mutual Funds (as of early 2025)

Fund Name

1-Year Return

3-Year Return

AUM (₹ Cr)

Expense Ratio

ICICI Prudential ESG Exclusionary Strategy Fund

31.89%

18.55%

1,528.70

1.01%

Quant ESG Equity Fund

28.27%

20.99%

312.26

0.79%

Axis ESG Integration Strategy Fund

25.91%

10.73%

1,334.37

1.27%

SBI ESG Exclusionary Strategy Fund

22.96%

13.36%

5,806.08

1.31%

Mirae Asset ESG Sector Leaders FOF

21.82%

12.30%

90.00

0.46%

Source: Dhan.co

Comparative Performance: ESG Funds vs. Traditional Large-Cap Funds

While ESG funds have shown commendable returns, it's essential to compare them with traditional large-cap funds to gauge relative performance.​


Fund Category

1-Year Avg Return

3-Year Avg Return

ESG Funds

32.50%

15.07%

Large-Cap Funds

35.40%

17.80%

Source: Angel One


This comparison indicates that while ESG funds are competitive, traditional large-cap funds have slightly outperformed them in recent years.​

Risk-Adjusted Performance Metrics

Evaluating mutual funds requires looking beyond raw returns. Risk-adjusted metrics provide a more comprehensive view:​

 

·         Sharpe Ratio: Measures the return per unit of risk.

·         Alpha: Indicates a fund's performance relative to its benchmark.

·         Beta: Assesses a fund's volatility compared to the market.​

For instance, the Quantum ESG Best In Class Strategy Fund boasts:​

·         5-Year Sharpe Ratio: 1.14

·         5-Year Alpha: 2.11

·         5-Year Beta: 0.87​

 

Key Considerations for ESG Investing

·         Alignment with Personal Values: ESG funds allow investors to support companies that prioritize environmental sustainability, social responsibility, and strong governance.​

·         Performance Metrics: While ESG funds aim for positive impact, it's essential to assess their financial performance and compare them with traditional funds.​

·         Long-Term Commitment: ESG investments often yield better results over the long term, so patience is crucial.​


Conclusion

ESG mutual funds offer a pathway to invest responsibly without compromising on returns. As the world moves towards sustainable practices, aligning your investments with these values can be both financially rewarding and personally fulfilling.​Before investing, consider consulting with a financial advisor to ensure that ESG funds align with your overall investment strategy and financial goals.​

Disclaimer: Mutual fund investments are subject to market risks. Past performance is not indicative of future results. Please read all scheme-related documents carefully before investing.

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