For every person, it is important to clearly and consciously craft an investment strategy based on his/her financial goals. Moreover, it is also crucial to mindfully create investments which can be passed on to the next generations.
Environmental, Social and Governance (ESG) investing is gaining popularity for two prime reasons. One is investing in quality stocks and second is investments that have a positive impact. Globally, ESG Investing has gained popularity and is growing rapidly. As of 2020, the UN-backed PRI (Principles of Responsible Investing) is a thriving global initiative with 7,000 corporate signatories in 135 countries, representing over $110 trillion assets under management.
In India, the investors are becoming increasingly conscious about their choices, especially their investment choices. The role on good governance has become a core of investment strategies. People have become more vocal in expressing their strong views related to social and environmental issues. By investing in an ESG Fund these factors can be incorporated in individual’s investment plan.
In the beginning, it can be challenging to identify and select an ESG Fund for a new investor. So, here are three main factors one should consider while selecting an ESG Fund:
- Asset Manager:Selecting an asset management company that has a simple and transparent vision, has a mission to create awareness among the investors, has an objective to provide low-cost funds to meet all kind of financial goals and lastly, has showcased commitment towards responsible investing. These values and commitments can be deduced from the points below.
- Dedicated ESG Research:“One size fits all” doesn’t work in case of ESG Investing. Presence of dedicated team of research analysts focusing solely on identifying ESG companies, researching on such companies and staying updated with the issues related to ESG is highly advantageous and preferred.
- Portfolio Selection and Construction Process: Stock selection based on in-house ESG research and models gives the ESG Fund its unique structure. In the portfolio, the weight of company should clearly reflect the quality of Company’s ESG compliance.
Quantum Mutual Fund checks out on all the three parameters. Quantum offers Quantum India ESG Equity Fund, an open-ended equity fund investing in companies following Environment, Social and Governance (ESG) theme. The novelty of this Fund is that the ideation of an ESG Fund started 4 years back and then a dedicated ESG research team was set up to deep dive into formalization of the ESG assessment and evaluation process. High liquidity in terms of average daily traded volumes and ESG disclosures formed the foundation for identifying the active research coverage. The in-house ESG research focuses on understanding into a company’s management practices, sustainable businesses and risk profile, which would thereby help in understanding the impact on long-term sustainability. A comprehensive research framework based on level of disclosures, quality of disclosures and peer assessment is used for building a well-diversified portfolio of the ESG Fund.
It is time that investors should consider broadening their assessment lens to include non-financial ESG factors along with financial factors while selecting their investments and invest in Quantum India ESG Equity Fund.
Data Source: * United Nations Principles for Responsible Investing (PRI)
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