Why Should You be Investing in an ESG fund?

We all have some financial goals to fulfil at some point of time in our lives. But remember that long term financial goals like retirement planning or building a corpus for your child’s grand destination wedding need time. An individual may need to have a long term investment horizon if he / she wants to achieve such long term goals which may need them to create a corpus of at least Rs. 25 lakhs to Rs. 30 lakhs. There are some conservative schemes available for those who have zero risk appetite. However, the only drawback of investing in such schemes is that they usually offer low fixed interest rates. Hence, building a large corpus through such investments may or may not be possible.

While you watch the world become a better place every single day, don’t you want to do your bit and contribute in a unique way? What if we told you that you can actually contribute towards a sustainable environment by investing in some mutual funds? Sounds unique, right?

ESG – Short for Environmental, Social and Governance are the three pillars of every ESG Equity fund that give investors an opportunity to invest in a socially responsible fund whose secondary purpose (primary being capital appreciation) is to tackle issues like global warming, climate change, etc.

What is an ESG fund?

ESG funds usually avoid companies that contribute to environmental hazards like global warming, climate change, carbon footprint, carbon emissions, excessive use of water, companies that do not recycle appropriately, etc. This holistic approach is taken into consideration in most of the ESG funds before investing in a company’s business. ESG practitioners argue that companies that integrate ESG principles have the potential to enhance the reputation and goodwill of that company.

Let us understand the three pillars of ESG in detail

Environmental pillar focuses on-

• Climate change - Carbon emissions, Product carbon footprint, Energy Efficiency
• Natural Resource Use - Water stress, Biodiversity & Land use, Raw material sourcing, Financing Environmental Impact
• Waste Management - Toxic Emissions & Waste, Packaging material and waste, Electronic waste
• Environmental Opportunities - Opportunities in clean tech, green building, renewable energy

Social pillar focuses on –

• Human capital - Labour management, Health & Safety, Supply chain, Controversial sourcing
• Product Safety - Chemical safety, Financial Product Safety, Privacy & Data security, Insuring health
• Social Opportunities - Nutrition & Health, Access to communication, health & finance

Governance pillar focuses on –

• Corporate governance
• Business Ethics - Corruption & instability, Ethics and Fraud, Anti-competitive practices
• Government & Public Policy - Financial System instability

Axis ESG Equity Fund

Axis ESG Equity Fund is an open ended equity scheme investing in companies demonstrating sustainable practices across Environment, Social and Governance (ESG) themes. It will invest directly in overseas securities with focus on developed markets with a high level of ESG maturity. The scheme will exclude sectors/themes that are considered harmful from the society’s perspective, for example, exclusion of tobacco, liquor, defence stocks, etc. This product may be suitable for investors who are seeking capital appreciation over the long term and for those who wish to invest in companies demonstrating sustainable practices across Environment, Social and Governance (ESG) parameters.

Why investing in Axis ESG Equity Fund might be good for an investor?

ESG is a logical extension to Axis’s philosophy which supports the organization’s research on quality companies that can deliver sustainable growth. The idea here is to integrate ESG assessment in the overall Axis investment process and to launch a dedicated thematic ESG Fund that focuses on ESG issues.

Axis understands that ESG analysis is necessary but not sufficient. It may not have strong growth prospects, competitive moats or high return ratios. Also, conventional ESG metrics and 3rd party sources provide useful information but have limited investment value. Qualitative assessments using a deep understanding of the company are key for ESG investing.

Companies with sustainability characteristics might be able to achieve structural growth and have better operational performance. Axis only seeks quality companies that have the ability to generate sustainable growth. The fund house believes that only companies that run for the long term and companies who take account of their impact on all stakeholders may be able to sustain supernormal growth and returns.

Axis ESG Equity Fund provides investors with an opportunity to not only seek some financial benefits but also to invest in a socially-responsible fund. This step taken by Axis, to enhance the quality of our living environment, is a belief that condenses the core of sustainable investing.

Mutual fund investors should also be aware that since this is an equity-linked scheme, it carries a high-risk profile. Hence, investors should consult their financial advisers if in doubt about whether the product is suitable for them. To make informed decisions, consider using a mutual fund app to explore options and get insights into various schemes.

Axis ESG Equity Fund

An Open ended equity scheme investing in companies demonstrating sustainable practices across Environment, Social and Governance (ESG) theme

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.