ESG investing is becoming a big deal in India and around the world. It’s a way to put your money into companies that care about the environment, treat people fairly, and are run honestly. ESG stands for Environmental, Social, and Governance. This article explains what ESG investing is, why it’s popular globally, how much money is in it, why people like it, where India stands, how the European Union helps, what the future looks like, why it matters, why you should invest, and what options you have in India—
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| ESG:Environmental,Social & Governance. |
ESG investing is about picking companies that do good while making money. The “E” (Environmental) means they work to protect nature, like using solar energy or reducing waste. The “S” (Social) means they treat workers, customers, and communities well, with fair pay and equal opportunities. The “G” (Governance) means they’re run transparently, without corruption. Unlike regular investing, which only focuses on profits, ESG looks at how companies impact the world. It’s like using your money to support a better future.Globally, ESG investing is a hit. People, especially younger ones like millennials, want their money to back companies that fight climate change or promote fairness. Big firms like BlackRock say ESG companies are safer bets for long-term growth. In 2020, the United Nations set Sustainable Development Goals (SDGs), a global standard for companies to show they’re sustainable. Many countries, especially in Europe, now require companies to report their ESG efforts. For example, the European Union’s rules make big companies share how they’re doing on ESG, making it a key part of investing worldwide.
So, how much money is in ESG?
A lot! Globally, about $40 trillion was invested in ESG funds in 2020, which is 30% of all managed money. Experts say this could grow to $53 trillion by 2025, covering one-third of all investments. In Europe, ESG funds got €574.3 billion in 2023, showing huge interest. In the US, though, some investors pulled out $4.7 billion from ESG funds in 2024 because of debates about “woke capitalism.” Still, the global trend is upward, with ESG likely to cover half of all investments by 2025.
In India, ESG investing is still new but growing fast. India wants to hit net-zero carbon emissions by 2070, which needs $8-10 trillion in investments. The Securities and Exchange Board of India (SEBI) is helping by making the top 1,000 listed companies report their ESG performance. As of March 2024, India’s ESG funds manage ₹9,753 crore ($1.18 billion), up from ₹2,747 crore in 2020. Funds like the SBI Magnum Equity ESG Fund, with ₹5,472 crore, are leading. Big companies like Reliance Industries, aiming for net-zero carbon by 2035, are also jumping in.
The European Union plays a big role in ESG, even in India. The EU’s European Green Deal aims for carbon neutrality by 2050, and they’re putting money into sustainable projects worldwide. The European Investment Bank (EIB) funds things like solar and wind projects in India, helping companies go green. In 2023, the EU’s Sustainable Finance Disclosure Regulation (SFDR) sorted funds into categories like Article 8 (promoting ESG) and Article 9 (fully sustainable), making it easier for investors to pick. The EU’s Horizon Europe program also funds green tech and innovation, encouraging Indian companies to adopt ESG practices with loans or grants.
Looking ahead, ESG in India is set to boom. SEBI’s strict rules and growing awareness will pull in more investors. The NIFTY 100 ESG Index, which tracks ESG-compliant companies, has grown 10% yearly, beating the NIFTY 100’s 8.7%. Globally, ESG investments could hit $33.9 trillion by 2026, and India will get a slice of that thanks to its focus on renewable energy and sustainable policies.
Why does ESG matter?
It supports companies that tackle big problems like pollution, unfair treatment, and corruption. This cuts risks like environmental fines or scandals, which protects your money. In India, where pollution and inequality are real issues, ESG investing can make a difference while giving good returns.So, why should you invest in ESG? It often gives better returns because ESG companies are well-managed. Your money supports a cleaner planet and fairer society. As the world shifts to sustainability, ESG investments will likely grow in value. Plus, it feels good to back companies that match your values, like fighting climate change.In India, you’ve got plenty of ESG investment options. You can try ESG mutual funds like the SBI Magnum Equity ESG Fund, Quantum India ESG Equity Fund, or Mirae Asset ESG Sector Leaders ETF. There are also ESG ETFs that track indices like the NIFTY 100 ESG Index or S&P BSE 100 ESG Index. For wealthy investors, Alternative Investment Funds (AIFs) like Avendus India ESG Fund are an option. Green bonds, which fund eco-friendly projects, are another choice, backed by SEBI’s rules. You can also invest directly in stocks of companies like Reliance Industries, which are focusing on sustainability.
ESG investing lets you grow your money while helping the world. With global investments set to hit $53 trillion by 2025 and India’s ESG market growing, it’s a great time to start. The EU’s support, through funds like the EIB, is helping India go green. By picking ESG funds, ETFs, or green bonds, you can earn returns and build a better future. Start small, stay informed, and let your money do good.
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